Reference no: EM13962998
Rocky Mountain Corporation makes two types of hiking bootsXactive and the Pathbreaker.
Data concerning these two product lines appear below:
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
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):
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.