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 64.80 18.20 1.4 DLHS 25,000 units $ Pathbreaker 51.99 13.ee 1. DLHS 75 ce 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 $2,200.00 110,00 DLHS Required: Ia. Compute the predetermined overhead rate based on direct labor-hours 15. 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 5297,500 680, e Expected Activity active Pathbreaker Total 35,eee 75,000 110, 400 Activity Cost Pools and Activity Measures Supporting direct labor direct labor-hours) Batch setups (setups) Product sustaining number of products) General factory (nachine-hours) Total manufacturing overhead cost 2. See 7,500 10.000 72. sae $2,200, ea 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 Rea 2 Reg 3 Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product Xactive Pathbreaker Unit product cost

Answer 1

1A. Calculation of predetermined overhead rate based on direct Labour hours.

Pre determined overhead rate = Total manufacturing overhead/Total direct Labour hours

=$2,200,000/110,000

=$20 per DLH.

1B. Determine the unit product cost of each product.

Particulars	Xactive	Pathbreaker
Direct materials	$64.80	$51
Direct Labour	$18.20	$13
Manufacturing overhead	$28*	$20**
Unit product cost	$111	$84

*{($2,200,000/110,000)×35,000}÷25,000 =$28

**{($2,200,000/110,000)×75,000}÷75,000=$20

2. Activity rate for each of the four activity pools

Activity pool	Overhead cost	Total cost driver	Activity rate
Supporting direct Labour	$797,500	110,000	$7.25 per DLH
Batch setups	$680,000	400	$1,700 per setup
Product sustaining	$650,000	2	$325,000 per product line
General factory	$72,500	10,000	$7.25 per machine hour

3. Unit product cost of each product.

	Xactive	Pathbreaker
Direct materials	$64.80	$51
Direct Labour	$18.20	$13
Supporting direct Labour	$10.15	$7.25
Batch setup	$17	$3.4
Product sustaining	$13	$4.33
General factory	$0.725	$0.725
Unit product cost	$123.875	$79.705

Explanation:

Supporting direct Labour for Xactive : 797,500/110,000 ×35,000 /25,000 =$10.15

For Pathbreaker: 797,500/110,000 ×75,000 /75,000= $7.25

Batch setup for Xactive: 680,000/400 ×250/25,000=$17

For Pathbreaker: 680,000/400 ×150 /75,000 =$3.4

Product sustaining for Xactive: 650,000/2 ×1/25,000 =$13

For Pathbreaker: 650,000/2 ×1/75,000=$4.33

General factory for Xactive: 72,500/10,000 ×2,500/25,000 =$0.725

For Pathbreaker: 72,500/10,000 ×7,500/75,000 =$0.725.

_____×____

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