Why the traditional and activity based cost assignments

Assignment Help Managerial Accounting
Reference no: EM13962998

Rocky Mountain Corporation makes two types of hiking bootsXactive and the Pathbreaker. 

Data concerning these two product lines appear below:

1363_260-B-M-A-A-B-C (905)-1.png

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):

523_260-B-M-A-A-B-C (905)-2.png

Using Exhibit 7-10 as a guide, compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system. 

3. Using Exhibit 7-13 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assignmentsdiffer.

Reference no: EM13962998

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