Question

Check my work Exercise 4-10 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, L04-4] Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines appear below: points Skipped Direct materials per unit Direct labor cost per unit Direct labor-hours per unit Estimated annual production and sales Xactive $ 65.40 $ 18.80 1.4 DLHS 31,000 units Pathbreaker $ 51.60 $ 13.60 1 DLES 81,000 units eBook 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: References Estimated total manufacturing overhead Estimated total direct labor-hours $2,562,640 124,400 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 $ 939, 220 920,000 618,860 84,560 $2,562,640 Expected Activity Xactive Pathbreaker Total 43, 400 81,000 124,400 280 180 460 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 3,100 8,100 11,200 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.

Answer 1

$ Estimated total manufacturing overhead (a) Estimated total direct labor-hours (b) 25,62,640 124400 DLHS Requirement 1A Predetrmined overhead rate (a/b) $ 20.60 per DLH Requirement 1B Computation of Unit Product cost Xactive Pathbreaker 65.40 $ 51.60 18.80 $ 13.60 Direct Material per unit Direct Labor cosr per unit Maufacturing overhead per unit Xactive ($20.60 x 1.4 DLHs) Pathbreaker ($20.60 x 1.0 DLHs) Unit product cost 28.84 $ 20.60 c 113,04 S 85.80 Requirement 2 Working Note: Computation of activity rates Estimated Overhead Cost Activity Expected Activity Basis of Overhead Allocation Activity rate (a/b) Xactive Pathbreaker Total (b) Supporting direct labour Batch setups $ $ direct labour 9,39,220 hours 9,20,000 setups number of 6,18,860 products 43400 280 81000 180 124400 $ 460 $ 7.55 2,000.00 Product sustaining $ 1 1 2 $ 3,09,430.00 General factory 84,560 machine hours 3100 8100 11200 $ 7.55 Solution: Activity Cost Pools Supporting direct labor Batch setups Products sustaining General factory Activity Rate $ 7.55 per DLH $ 2,000.00 per setup $ 3,09,430.00 per product $ 7.55 per MHR

Requirement 3. Computation of Unit Product cost Direct Material per unit Direct Labor cosr per unit Total Units Product Xactive 65.40 18.80 84.20 31,000 $ 26,10,200.00 Pathbreaker $ 51.60 $ 13.60 $ 65.20 81,000 $52,81,200.00 ca $ 3,27,670.00 $16,68,600.00 $ 5,60,000.00 $ 3,60,000.00 Spporting direct labor overheads Xactive ($7.55 x 1.4 DLHs x 31000) Pathbreaker ($7.55 x 1.0 DLHs x 81000) Batch setup overheads Xactive ($2000 x 280 setups) Pathbreaker ($2000 x 180 setups) Product sustaining Xactive ($309430 x 1) Pathbreaker ($309430 x 1) General factory Xactive ($7.50 x 3100 MHR) Pathbreaker ($7.50 x 8100 MHR) Total Product cost Number of Units Unit product cost (A/B) $ 3,09,430.00 $ 3,09,430.00 $ 3,0 $ 23,405.00 (A) $ 61,155.00 $76,80,385.00 81,000 $ 94.82 $ 38,30,705.00 31,000 $ 123.57 (B) Therefore, unit product cost will be: Xactive Pathbreaker 123.57 $ 94.82 Unit product cost $

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