Question

ocky Mountain Corporation makes two types of hiking boots—Xactive and Pathbreaker. Data concerning these two product lines appear below:

	Xactive			Pathbreaker
Direct materials per unit	$	64.70		$	50.90
Direct labor cost per unit	$	18.10		$	12.90
Direct labor-hours per unit		1.4	DLHs		1	DLHs
Estimated annual production and sales		24,000	units		74,000	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	$2,141,240
Estimated total direct labor-hours	107,600	DLHs

Required:

1-a. Compute the predetermined overhead rate based on direct labor-hours.

1-b. Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product.

2. The company is considering replacing its conventional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools:

	Estimated Overhead Cost			Expected Activity
Activity Cost Pools and Activity Measures				Xactive			Pathbreaker			Total
Supporting direct labor (direct labor-hours)	$	774,720			33,600			74,000		107,600
Batch setups (setups)		643,500			245			145		390
Product sustaining (number of products)		652,460			1			1		2
General factory (machine-hours)		70,560			2,400			7,400		9,800
Total manufacturing overhead cost	$	2,141,240

Determine the activity rate for each of the four activity cost pools.

3. Using the activity rates and other data from the problem, determine the unit product cost of each product.

1. Compute the predetermined overhead rate based on direct labor-hours?

2.

Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product? (Round your intermediate calculations and final answers to 2 decimal places.)

	Xactive Pathbreaker Unit product cost

3.

Determine the activity rate for each of the four activity cost pool? (Round your "per DLH" and "per MHR" answers to 2 decimal places.)

	Activity Cost Pools Activity Rate Supporting direct labor per DLH Batch setups per setup Product sustaining per product General factory per MHR

4. Using the activity rates and other data from the problem, determine the unit product cost of each product? (Round your intermediate calculations and final answers to 2 decimal places.)

	Xactive Pathbreaker Unit product cost

Answer 1

Answers Predetermined Overhead Rate 19.90 PerDLH Xactive PathBreaker Units Prodcut cost (Using Predetermiend Rate) 110.66 83.70 Activity Cost Pool Activity Rate Supporing direct Labor 7.20 Per DLH Batch setup 1650.00 Per setup Prodcut Sustainind 326230.00 Per Number of Prodcut General Factory 7.20 Per MH Xactive PathBreaker 3. Unit Prodcut cost ( Activity Based) 124.04 79.36

Direct Material Direct Labor Dirct Labou hour Per unit Estimated Production Xactive 64.70 18.10 1.40 24000 PathBreaker 50.90 12.90 1.00 74000 Estimated MOH Estimated Labor hours Predetermined Overhead Rate 2141240 107600 19.90 2141240/107600 Xactive PathBreaker Total Total Direct Labor Hours =(Units * Direct Labor Hour) 33600 74000 107600 Traditional Costing System Xactive Direct Material = Units * DM Rate 1552800 Direct Labor= Units * DL Rate 434400 Manufacturing Overheads 668640 Total Manufacturing Cost 2655840 Total Units 24000 Units Product Cost= Totalcost / Units 110,66 PathBreaker 3766600 954600 1472600 6193800 74000 83.70

Determination of Activity Rate Activty Pool Estimated OH Supporing direct Labor 774720 Batch setup 643500 Prodcut Sustainind 652460 General Factory 70560 2141240 Base 107600 390 Activity Rate 7.20 1650.00 326230.00 7.20 9800 Activity Based Costing System Xactive Direct Material 1552800 Direct Labor 434400 Supporing direct Labor 241920 Batch setup 404250 Prodcut Sustainind 326230 General Factory 17280 Total Manufacturing Cost 2976880 Total Units 24000 Units Product Cost= Totalcost / Units 124.04 PathBreaker 3766600 954600 532800 239250 326230 53280 5872760 74000 79.36