Question

Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines appear below: $ $ Xactive 65.80 19.20 1.4 DLHS 35,000 units Direct materials per unit Direct labor cost per unit Direct labor-hours per unit Estimated annual production and sales $ $ Pathbreaker 52.00 14.00 1 DLHS 85,000 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 Estimated total direct labor-hours $2,814,000 134,000 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 $1,038,500 1,100,000 582,500 93,000 $ 2,814,000 Activity Cost Pools and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) General factory (machine-hours) Total manufacturing overhead cost Expected Activity Xactive Pathbreaker Total 49,000 85,000 134,000 300 200 500 3,500 8,500 12,000 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. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Req3 Compute the predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH

Answer 1

1.a	Predetermined OH rate =Estimated manufacturing overhead / Estimated direct labor hours
	Predetermined OH rate =$2,814,000 / $134,000 =$21 per DLH
1.b		Xactive	Pathbreaker
	Direct material per unit	$65.80	$52.00
	Direct Labor cost per unit	$19.20	$14.00
	Manufacturing OH per unit[($21*1.4DLH),($21*1.0DLH)]	$29.40	$21.00
	Unit Product cost	$114.40	$87.00
2	Computation of Activity Rate
	Activities	Costs	Cost drivers	Cost driver total	Overhead rate(Costs/Cost driver total)
	Supporting Direct labor	$10,38,500	Direct labor hours	1,34,000	$7.75	per DLH
	Batch setups	$11,00,000	No. of setups	500	$2,200.00	per setup
	Product sustaining	$5,82,500	No. of products	2	$2,91,250.00	per product
	General Factory	$93,000	Machine hours	12,000	$7.75	per machine hours
3		Xactive	Pathbreaker
	Direct material per unit	$65.80	$52.00
	Direct Labor cost per unit	$19.20	$14.00
	Manufacturing OH per unit(See Note)	$38.80	$17.13
	Unit Product Cost	$123.80	$83.13
	Note:
		Xactive	Pathbreaker
	Supporting Direct labor	$3,79,750	$6,58,750
	Batch setups	$6,60,000	$4,40,000
	Product sustaining	$2,91,250	$2,91,250
	General Factory	$27,125	$65,875
	Total Manufacturing OH	$13,58,125	$14,55,875
	No. of units produced and sold	35,000	85,000
	Manufacturing OH per unit	$38.80	$17.13