Rocky Mountain Corporation makes two types of hiking boots Xactive and Pathbreak

Question

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: Compute the predetermined overhead rate based on direct labor-hours. Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product.

Explanation / Answer

1 a - Pre determined over head rate = Estimate manufacturing overheads / Estimated direct labor hours

                                                          = 2,200,000 / 110,000 = $20

1 b - Unit product cost = Direct Material per unit + Direct Labour per unit + O/h per unit

X active Pathbreaker Direct Materials 64.8 51 Direct Labor 18.2 13 Manufacturing o/h 20 20 Unit Product cost 103 84

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