Rocky Mountain Corporation makes two types of hikingboots—Xactive and Pathbreaker. Data concerning these two productlines appear below:
| Xactive | Pathbreaker |
| Direct materialsper unit | $ | 64.30 | | $ | 50.50 | |
| Direct laborcost per unit | $ | 17.70 | | $ | 12.50 | |
| Directlabor-hours per unit | | 1.4 | DLHs | | 1 | DLHs |
| Estimated annualproduction and sales | | 20,000 | units | | 70,000 | units |
|
The company has a conventional costing system in whichmanufacturing overhead is applied to units based on directlabor-hours. Data concerning manufacturing overhead and directlabor-hours for the upcoming year appear below:
| | |
| Estimated totalmanufacturing overhead | $1,911,000 | |
| Estimated totaldirect labor-hours | 98,000 | DLHs |
|
Required:
1-a. Compute the predetermined overhead rate based on directlabor-hours.
1-b. Using the predetermined overhead rate and other data fromthe problem, determine the unit product cost of each product.
2. The company is considering replacing its conventional costingsystem with an activity-based costing system that would assign itsmanufacturing overhead to the following four activity costpools:
| Estimated OverheadCost | Expected Activity |
| Activity CostPools and Activity Measures | Xactive | Pathbreaker | Total |
| Supportingdirect labor (direct labor-hours) | $ | 686,000 | | | 28,000 | | | 70,000 | | 98,000 |
| Batch setups(setups) | | 507,500 | | | 225 | | | 125 | | 350 |
| Productsustaining (number of products) | | 654,500 | | | 1 | | | 1 | | 2 |
| General factory(machine-hours) | | 63,000 | | | 2,000 | | | 7,000 | | 9,000 |
| Totalmanufacturing overhead cost | $ | 1,911,000 | | | | | | | | |
|
Determine the activity rate for each of the four activity costpools.
3. Using the activity rates and other data from the problem,determine the unit product cost of each product.
