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Comparing Traditional and Activity-Based Product Margins [LOl, L03, L04, L05] Rocky Mountain Corporation makes two types of hiking boots-Xactive and the Pathbreaker. Data concerning these two product lines appear below: The company has a traditional 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: Using Exhibit 7-12 as a guide, compute the product margins for the Xactive and the Path- breaker products under the company's traditional costing system. The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs): Using Exhibit 7-10 as a guide, compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system. 3. Using Exhibit 7-13 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assign¬ments differ.
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