Rocky Mountain Corporation _Traditional & Activity Based costing
accountguruRocky Mountain Corporation makes two types of hiking boots—Xactive and the Pathbreaker. Data concerning these two product lines appear below: |
| Xactive | Pathbreaker | ||||
Selling price per unit | $ | 127.00 |
| $ | 89.00 |
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Direct materials per unit | $ | 64.80 |
| $ | 51.00 |
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Direct labor per unit | $ | 18.20 |
| $ | 13.00 |
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Direct labor-hours per unit |
| 1.4 | DLHs |
| 1.0 | DLHs |
Estimated annual production and sales |
| 25,000 | units |
| 75,000 | units |
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: |
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Estimated total manufacturing overhead | $2,200,000 | ||
Estimated total direct labor-hours | 110,000 DLHs | ||
Required: | |
1. | Compute the product margins for the Xactive and the Pathbreaker products under the company’s traditional costing system. (Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.) |
| Xactive | Pathbreaker | Total |
Product margin | $ [removed] | $ [removed] | $ [removed] |
2. | 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): |
| Estimated | Expected Activity | |||
Activities and Activity Measures | Overhead Cost | Xactive | Pathbreaker | Total | |
Supporting direct labor (direct labor-hours) | $ | 797,500 | 35,000 | 75,000 | 110,000 |
Batch setups (setups) |
| 680,000 | 250 | 150 | 400 |
Product sustaining (number of products) |
| 650,000 | 1 | 1 | 2 |
Other |
| 72,500 | NA | NA | NA |
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Total manufacturing overhead cost | $ | 2,200,000 |
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Compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system. (Loss amounts should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places and final answers to the nearest dollar amount. Omit the "$" sign in your response.) |
| Xactive | Pathbreaker | Total |
Product margin | $ [removed] | $ [removed] | $ [removed] |
3. | Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your percentage answers to one decimal place and other answers to the nearest dollar amount. Omit the "$" & "%" signs in your response.) |
11 years ago
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rocky_mountain_corporation__traditional__activity_based_costing.xlsx
