Exercise 4-10 Contrasting ABC and Conventional Product Costs [LO4-2, LO4-3, LO4-
ID: 2334473 • Letter: E
Question
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:
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:
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:
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.
Xactive Pathbreaker Direct materials per unit $ 64.50 $ 50.70 Direct labor cost per unit $ 17.90 $ 12.70 Direct labor-hours per unit 1.4 DLHs 1 DLHs Estimated annual production and sales 22,000 units 72,000 unitsExplanation / Answer
1-a) Predetermined OH rate = Total Manufacturing Overhead/Total direct labor hours
= $2,025,160/102,800 DLHs
= $19.70 per labor hour
1-b) Calculation of unit product cost (Amounts in $)
2) Calculation of Activity Rate (Amounts in $)
3) Allocation of manufacturing Overhead cost (Amounts in $)
Calculation of Unit product cost (Amounts in $)
Particulars Xactive Pathbreaker Direct labor hours per unit (A) 1.4 DLHs 1 DLHs Predetermined Overhead Rate (B) 19.70 19.70 Manufacturing Overhead per unit (C = A*B) 27.58 19.70 Direct materials per unit (D) 64.50 50.70 Direct labor cost per unit (E) 17.90 12.70 Unit Product Cost (C+D+E) 109.98 83.10Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.