Question

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 $ 63.80 $ 50.00

Direct labor cost per unit $ 17.20 $ 12.00

Direct labor-hours per unit 1.4 DLHs 1 DLHs

Estimated annual production and sales 15,000 units 65,000 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 $1,634,000

Estimated total direct labor-hours 86,000 DLHs

Required:


1-a. Compute the predetermined overhead rate based on direct labor-hours.


1-b. Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product.

Answer 1

Answer:

Results are below.

Explanation:

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 1,634,000 / 86,000

Predetermined manufacturing overhead rate= $19 per direct labor hour

Now, we can allocate overhead to each unitary product:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Xactive= 19*1.4= $26.6

Pathbreaker= 19*1= $19

Finally, the unitary cost of each product:

Xactive= 63.8 + 17.2 + 26.6= $107.6

Pathbreaker= 50 + 12 + 19= $81