Solved by verified expert :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
$
$
$
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
$
$
$
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.)
