Question

Check my work 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 $ 64.10 $17.50 1.4 DLHS 18,000 units Pathbreaker $ 50.30 $ 12.30 1 DLHS 68,000 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: ces Estimated total manufacturing overhead Estimated total direct labor-hours $1,798,760 93,200 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: 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 Estimated Overhead Cost $ 643,080 445,500 650,840 59,340 $1,798,760 Expected Activity Xactive Pathbreaker Total 25, 200 6 8,000 93,200 215 115 330 2 1,800 6,800 8,600 1

Answer 1

Direct Material Direct Labor Dirct Labou hour Per unit Estimated Production Working Notes Xactive 64.10 17.50 1.40 PathBreaker 50.30 12.30 1.00 68000 Estimated MOH Estimated Labor hours Predetermined Overhead Rate 1798760 93200| 19.30 1798760/93200 Xactive PathBreaker Total Total Direct Labor Hours =(Units * Direct Labor Hour) 25200 68000 93200 Traditional Costing System Xactive Direct Material = Units * DM Rate 1153800 Direct Labor= Units * DL Rate 315000 Manufacturing Overheads 486360 Total Manufacturing Cost 1955160 Total Units 18000 Units Product Cost= Totalcost / Units 108.62 PathBreaker 3420400 836400 1312400 5569200 68000 81.90

Determination of Activity Rate Activty Pool Estimated OH Supporing direct Labor 643080 Batch setup 445500 Prodcut Sustainind 650840 General Factory 59340 1798760 Base 93200 330 Activity Rate 6.90 1350.00 8600 6.90 Activity Based Costing System Xactive Direct Material 1153800 Direct Labor 315000 Supporing direct Labor 173880 Batch setup 290250 Prodcut Sustainind 325420 General Factory 12420 Total Manufacturing Cost 2270770 Total Units Units Product Cost= Totalcost / Units 126.15 PathBreaker 3420400 836400 469200 155250 325420 46920 5253590 77.26

Answers Predetermined Overhead Rate 19.30 PerDLH Xactive PathBreaker Units Prodcut cost (Using Predetermiend Rate) 108.62 81.90 Activity Cost Pool Activity Rate Supporing direct Labor 6.90 Per DLH Batch setup 1350.00 Per setup Prodcut Sustainind 325420.00 Per Number of Prodcut General Factory 6.90 Per MH Xactive PathBreaker 3. Unit Prodcut cost (Activity Based) 126.15 77.26