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 $ 64.40 $ 17.30 1.4 LHS 21,000 units Pathbreaker $50.60 $12.60 1 DHS 71,000 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 $1,967,840 100,400 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: Activity Cost Pools and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) General factory" (machine-hours) Estimated Overhead Cost $ 707,820 540,000 655,160 64,860 Expected Activity Xactive Pathbreaker Total 29,400 71,000 100,400 230 360 1 1 2 2,100 7,100 9,200 13e
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Answer 1

Solution 1a:
Computation of Predetermined overhead rate
Particulars	Amount
Estimated overhead	$1,967,840.00
Estimated direct labor hours	100400
Predetermined overhead rate per DLH	$19.60

Solution 1b:
Computation of unit product cost - Traditional costing
Particulars	Xactive	Pathbreaker
Direct material per unit	$64.40	$50.60
Direct labor per unit	$17.80	$12.60
Manufacturing overhead cost per unit (Direct labor hour per unit * Overhead rate per direct labor hour)	$27.44	$19.60
Unti Product Cost	$109.64	$82.80

Solution 2:
Determination of activity rate for each activity & allocation of overhead
Activity	Estimated Overhead Cost	Activity Base	Usage of Activity Base	Activity Rate	Xactive	Pathbreaker
Usage	Allocated Costs	Usage	Allocated Costs
Supporting direct labor cost	$707,820.00	Direct Labor hours	100400	$7.05	29400	$207,270.00	71000	$500,550.00
Batch Setups	$540,000.00	Setups	360	$1,500.00	230	$345,000.00	130	$195,000.00
Product sustaining	$655,160.00	Number of products	2	$327,580.00	1	$327,580.00	1	$327,580.00
General Factory	$64,860.00	Machine hours	9200	$7.05	2100	$14,805.00	7100	$50,055.00
Total	$1,967,840.00					$894,655.00		$1,073,185.00
Nos of units						21000		71000
Allocated overhead per unit						$42.60		$15.12

Solution 3:
Computation of unit product cost - Activity Based costing
Particulars	Xactive	Pathbreaker
Direct material per unit	$64.40	$50.60
Direct labor per unit	$17.80	$12.60
Manufacturing overhead cost per unit	$42.60	$15.12
Unit Product Cost	$124.80	$78.32