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Chapter1: Financial Statements And Business Decisions
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Exercise 4-10 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4]
Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines
appear below:
Xactive
Pathbreaker
50.60
Direct materials per unit
Direct labor cost per unit
Direct labor-hours
Estimated annual production and sales
64.40
$.
17.80
$4
12.60
per unit
1.4 DLHS
1 DLHS
21,000 units
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
es
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
Estimated
Overhead Cost
Xactive
29,400
230
Expected Activity
Pathbreaker
71,000
130
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
$707,820
540,000
655,160
64,860
$1,967,840
100,400
360
1
1
2,100
7,100
9,200
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Transcribed Image Text:Homework
Saved
Exercise 4-10 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-4]
Rocky Mountain Corporation makes two types of hiking boots-Xactive and Pathbreaker. Data concerning these two product lines
appear below:
Xactive
Pathbreaker
50.60
Direct materials per unit
Direct labor cost per unit
Direct labor-hours
Estimated annual production and sales
64.40
$.
17.80
$4
12.60
per unit
1.4 DLHS
1 DLHS
21,000 units
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
es
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
Estimated
Overhead Cost
Xactive
29,400
230
Expected Activity
Pathbreaker
71,000
130
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
$707,820
540,000
655,160
64,860
$1,967,840
100,400
360
1
1
2,100
7,100
9,200
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LEGO
Transcribed Image Text:5
Product sustaining (number of products)
General factory (machine-hours)
655,160
64,860
1
1
2,100
7,100
9,200
Total manufacturing overhead cost
$1,967,840
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.
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Req 1A
Req 1B
Req 2
Req 3
Determine the activity rate for each of the four activity cost pools. (Round your "per DLH" and "per MHR" answers to 2
decimal places.)
Activity Cost Pools
Activity Rate
Supporting direct labor
Batch setups
DLH
per setup
Product sustaining
per product
General factory
per MHR
( Req 1B
Req 3
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