Question

Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines appear below: Direct materials per unit Direct labor cost per unit Direct labor-hours per unit Estimated annual production and sales Xactive $ 63.80 $ 17.20 1.4 DLHS 15,000 units Pathbreaker $ 50.00 $ 12.00 1 DLHS 65,000 units The company has a conventional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $1,634,000 Estimated total direct labor-hours 86,000 DLHS Required: 1-a. Compute the predetermined overhead rate based on direct labor-hours. (Round the intermediate calculations and final answer to two decimal places.)

Answer 1

1-a.

Compute the predetermined overhead rate based on direct labor hours as follows:

Predetermined overhead rate = Estimating total manufacturing overhead  $\div$ Estimated total direct labor hours

= $1,634,000 $\div$ 86,000 DLHs

= $19 per DLH

__________________________________________________________________

1-b

Determine unit product cost for each product as follows:

	X Active	Pathbreaker
Direct materials	$63.80	$50
Direct Labor	$17.20	$12
Manufacturing overhead	$26.60	$19
($19 × 1.4 DLHs), ($19 × 1DLHs)
Unit product cost	$107.60	$81.00

_________________________________________________________

2.

Determine the activity rate as follows:

Activity cost pools	Estimated overhead cost (A)	Expected activity (B)	Activity rate (A/B)
Supporting direct labor	$580,500	86000	$6.75	Per DLH
Batch setups	$360,000	300	$1,200.00	Per Setups
Product sustaining	$639,500	2	$319,750.00	Per product
General factory	$54,000	8000	$6.75	Per MH

____________________________________________________________

3.

Determine the unit product cost as follows:

Manufacturing overhead:		X Active		Pathbreaker
Activity cost Pools	Activity Rate (A)	Expected Activity (B)	Overhead cost [C= A × B]	Expected Activity (D)	Overhead cost [E = A × D]
Supporting direct labor	$6.75	21000	$141,750	6500	$43,875
Batch setups	$1,200	200	$240,000	100	$120,000
Product sustaining	$319,750	1	$319,750	1	$319,750
General factory	$6.75	1500	$10,125	6500	$43,875
Total			$711,625		$527,500
÷
Number of units produced			15000 units		65000 units
Manufacturing overhead per unit			$47.44		$8.12