Question

Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product line appear below: Direct materials per unit Direct labor cost per unit Direct labor-hours per unit Estimated annual production and sales $ $ Xactive 65.10 18.5e 1.4 LHS 28,000 units $ $ 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: 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 $ 67,280 795,500 637,940 78,440 $2,379,160 Expected Activity Xactive Pathbreaker Total 39,200 78,000 117,200 165 430 265 2,800 7,809 18,680 < Prey 4 of 4 Next >

Answer 1

Part 1

Predetermined overhead rate

$20.30

per DLH

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total direct labor-hours = 2379160/117200 = $20.30 per DLH

Part 1 B

	Xactive	Pathbreaker
Unit product cost	$112.02	$84.90

Unit product cost = Direct material cost per unit + Direct labor cost per unit + Manufacturing overhead cost per unit

	Xactive	Pathbreaker
Direct material cost per unit	65.10	51.30
Direct labor cost per unit	18.50	13.30
Manufacturing OH cost per unit (20.30*1.4); (20.30*1)	28.42	20.30
Total unit cost	$112.02	$84.90

Part 2

Activity Cost Pools	Activity Rate
Supporting direct labor	$7.40	per DLH
Batch setups	$1850.00	per setup
Product sustaining	$318970.00	per product
General factory	$7.40	Per MHR

Activity Cost Pools	(a) Total Cost	(b) Total Activity	(a) ÷ (b) Activity Rate
Supporting direct labor	867280	117200	$7.40	per DLH
Batch setups	795500	430	$1850.00	per setup
Product sustaining	637940	2	$318970.00	per product
General factory	78440	10600	$7.40	Per MHR

Part 3

	Xactive	Pathbreaker
Unit product cost	$123.60	$80.74

Overhead cost per unit calculation:

	Xactive	Pathbreaker
Supporting direct labor (7.40*39200); (7.40*78000)	290080	577200
Batch setups (1850*265); (1850*165)	490250	305250
Product sustaining (318970*1); (318970*1)	318970	318970
General factory (7.40*2800); (7.40*7800)	20720	57720
Total Overhead cost (a)	1120020	1259140
Estimated total units (b)	28000	78000
Overhead cost per unit (a)/(b)	$40.00	$16.14

	Xactive	Pathbreaker
Direct material cost per unit	65.10	51.30
Direct labor cost per unit	18.50	13.30
Manufacturing OH cost per unit (20.30*1.4); (20.30*1)	40.00	16.14
Total unit cost	$123.60	$80.74