Question
Exercise 3-10 Contrasting ABC and Conventional Product Costs [LO3-2, LO3-3, LO3-4] Rocky Mountain Corporation makes two types of hiking bootsXactive and Pathbreaker. Data concerning these
Exercise 3-10 Contrasting ABC and Conventional Product Costs [LO3-2, LO3-3, LO3-4]
Rocky Mountain Corporation makes two types of hiking bootsXactive and Pathbreaker. Data concerning these two product lines appear below: |
| Xactive | Pathbreaker | ||||
Direct materials per unit | $ | 63.80 |
| $ | 50.00 |
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Direct labor cost per unit | $ | 17.20 |
| $ | 12.00 |
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Direct labor-hours per unit |
| 1.4 | DLHs |
| 1 | DLHs |
Estimated annual production and sales |
| 15,000 | units |
| 65,000 | units |
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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: |
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Estimated total manufacturing overhead | $1,634,000 |
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Estimated total direct labor-hours | 86,000 | DLHs |
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Required: |
1-a. | Compute the predetermined overhead rate based on direct labor-hours. (Round the intermediate calculations and final answer to two decimal places.) |
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1-b. | Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product. (Round the intermediate calculations and final answer to two decimal places.) |
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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 | Expected Activity | |||
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Activity Cost Pools and Activity Measures | Xactive | Pathbreaker | Total | ||
Supporting direct labor (direct labor-hours) | $ | 580,500 | 21,000 | 65,000 | 86,000 |
Batch setups (setups) |
| 360,000 | 200 | 100 | 300 |
Product sustaining (number of products) |
| 639,500 | 1 | 1 | 2 |
General factory (machine-hours) |
| 54,000 | 1,500 | 6,500 | 8,000 |
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Total manufacturing overhead cost | $ | 1,634,000 |
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| Determine the activity rate for each of the four activity cost pools. (Round your final answers to 2 decimal places.) |
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3. | Using the activity rates and other data from the problem, determine the unit product cost of each product. (Round the intermediate calculations and final answer to two decimal places.) |
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