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 64.20 17.60 1.4 DLHS 19,000 units Pathbreaker 50.40 12.40 1 DLHS 69,000 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 $1,854,640 95,600 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 $ 664,420 476,000 653,060 61,160 $1,854,640 Expected Activity Xactive Pathbreaker Total 26,600 69,000 95,600 220 120 340 1 1 1,900 6,900 8,800 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.

Answer 1

Direct Material Direct Labor Direct Labor hour Per unit Estimated Production Working Notes Xactive 64.20 17.60 1.40 19000 PathBreaker 50.40 12.40 1.00 69000 Estimated MOH 1854640 Estimated Labor hours 95600 Predetermined Overhead Rate 19.40 1854640/95600 Xactive PathBreaker Total Total Direct Labor Hours =(Units * Direct Labor Hour) 26600 69000 95600 Traditional Costing System Xactive PathBreaker Direct Material = Units * DM Rate 1219800 3477600 Direct Labor= Units * DL Rate 334400 855600 Manufacturing Overheads 516040 1338600 Total Manufacturing Cost 2070240 5671800 Total Units 19000 69000 Units Product Cost= Total cost / Units 108.96 82.20

Determination of Activity Rate Activity Pool Estimated OH Supporting direct Labor 664420 Batch setup 476000 Product Sustaining 653060 General Factory 61160 1854640 Base 95600 340 2 8800 Activity Rate 6.95 1400.00 326530.00 6.95 95600 340 664420 / 476000/ 653060 / 61160 / 8800 Activity Based Costing System Xactive Direct Material 1219800 Direct Labor 334400 Supporting direct Labor 184870 Batch setup 308000 Product Sustaining 326530 General Factory 13205 Total Manufacturing Cost 2386805 Total Units 19000 Units Product Cost= Total cost / Units 125.62 PathBreaker 3477600 855600 479550 168000 326530 47955 5355235 69000 77.61

Answers Predetermined Overhead Rate 19.40 PerDLH Xactive PathBreaker Units Product cost (Using Predetermined Rate) 108.96 82.20 Activity Cost Pool Activity Rate Supporting direct Labor 6.95 Per DLH Batch setup 1400.00 Per setup Product Sustaining 326530.00 Per Number of Product General Factory 6.95 Per MH Xactive PathBreaker 3. Unit Product cost ( Activity Based) 125.62 77.61