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Rocky Mountain Corporation _Traditional & Activity Based Costing
Rocky 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
Direct materials per unit
$
64.80
$
51.00
Direct labor per unit
$
18.20
$
13.00
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:
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
Total manufacturing overhead cost
$
2,200,000
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.)
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