Question

Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines appear below: $ $ Xactive 65.10 18.50 1.4 DLHS 28,000 units Direct materials per unit Direct labor cost per unit Direct labor-hours per unit Estimated annual production and sales $ $ Pathbreaker 51.30 13.30 1 DLHS 78,000 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 $2,379,160 117,200 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: Estimated Overhead Cost $ 867,280 795,500 637,940 78,440 $2,379,160 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 39,200 78,000 117,200 265 165 430 2 2,800 7,800 10,600 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 Reg 3 Compute the predetermined overhead rate based on direct labor-hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per DLH Reg 1A Req 1B >

Answer 1

1.a	Predetermined OH rate =Estimated manufacturing overhead / Estimated direct labor hours
	Predetermined OH rate =$2,379,160 / $117,200 =$20.30 per DLH
1.b		Xactive	Pathbreaker
	Direct material per unit	$65.10	$52.00
	Direct Labor cost per unit	$18.50	$14.00
	Manufacturing OH per unit[($20.3*1.4DLH),($20.3*1.0DLH)]	$28.42	$20.30
	Unit Product cost	$112.02	$86.30
2	Computation of Activity Rate
	Activities	Costs	Cost drivers	Cost driver total	Overhead rate(Costs/Cost driver total)
	Supporting Direct labor	$8,67,200	Direct labor hours	1,17,200	$7.40	per DLH
	Batch setups	$7,95,500	No. of setups	430	$1,850.00	per setup
	Product sustaining	$6,37,940	No. of products	2	$3,18,970.00	per product
	General Factory	$78,440	Machine hours	10,600	$7.40	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)	$40.00	$16.14
	Unit Product Cost	$125.00	$82.14
	Note:
		Xactive	Pathbreaker
	Supporting Direct labor	$2,90,080	$5,77,200
	Batch setups	$4,90,250	$3,05,250
	Product sustaining	$3,18,970	$3,18,970
	General Factory	$20,720	$57,720
	Total Manufacturing OH	$11,20,020	$12,59,140
	No. of units produced and sold	28,000	78,000
	Manufacturing OH per unit	$40.00	$16.14