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Rocky Mountain Corporation makes two types of hiking boots€”Xactive and the Pathbreaker.
Data concerning these two product lines appear below:
Rocky Mountain Corporation makes two types of hiking boots€”Xactive and
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. 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.
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):
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