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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

Direct labor cost per unit

$

17.20

$

12.00

Direct labor-hours per unit

1.4

DLHs

1

DLHs

Estimated annual production and sales

15,000

units

65,000

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

$1,634,000

Estimated total direct labor-hours

86,000

DLHs

Required:

1-a.

Compute the predetermined overhead rate based on direct labor-hours. (Round the intermediate calculations and final answer to two decimal places.)

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.)

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

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

Total manufacturing overhead cost

$

1,634,000

Determine the activity rate for each of the four activity cost pools. (Round your final answers to 2 decimal places.)

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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