Exercise 3-10 Contrasting ABC and Conventional
Product Costs [LO3-2, LO3-3, LO3-4]
Rocky Mountain Corporation makes two types of hiking boots—Xactive and
Pathbreaker. Data concerning these two product lines appear below: Xactive
Pathbreaker
Direct materials per unit
$
64.90
$
51.10
Direct labor cost per unit
$
18.30
$
13.10
Direct labor-hours per unit
1.4
DLHs
1
DLHs
Estimated annual production and sales
26,000
units
76,000
units The company has a conventional 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
$2,259,240
Estimated total direct labor-hours
112,400
DLHs Required:
1-a.
Compute the predetermined overhead rate based on direct labor-hours. (Round
the intermediate calculations and final answer to two decimal places.) 1-b.
Using the predetermined overhead rate and other data from the problem,
determine the unit product cost of each product. (Round the intermediate
calculations and final answer to two decimal places.) 2.
The company is considering replacing its conventional costing system with an
activity-based costing system that would assign its manufacturing overhead to
the following four activity cost pools: Estimated Overhead Cost
Expected Activity Activity Cost Pools and Activity Measures
Xactive
Pathbreaker
Total
Supporting direct labor (direct labor-hours)
$
820,520
36,400
76,000
112,400
Batch setups (setups)
717,500
255
155
410
Product sustaining (number of products)
646,760
1
1
2
General factory (machine-hours)
74,460
2,600
7,600
10,200 Total manufacturing overhead cost
$
2,259,240 Determine the activity rate for each of the four activity cost pools. (Round your
final answers to 2 decimal places.) 3.
Using the activity rates and other data from the problem, determine the unit
product cost of each product. (Round the intermediate calculations and final
answer to two decimal places.)

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