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 $ 64.00 $ 50.20 Direct labor cost per unit $ 17.40 $ 12.20 Direct labor-hours per unit 1.4 DLHs 1 DLHs Estimated annual production and sales 17,000 units 67,000 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 $1,743,360 Estimated total direct labor-hours 90,800 DLHs
Requried:
a. Compute the predetermined overhead rate based on direct labor-hours.
b. Using the predetermined overhead rate and other data from the problem, determine the unit product cost of each product.

Answer 1

Answer:

1a. Predetermined overhead rate = Estimated total manufacturing overhead / Estimated total direct labor-hours

Predetermined overhead rate = $1,743,360 / 90,800 DLHs

Predetermined overhead rate = $19.20 per DLH

1b.                     Computation of Unit Product Cost

                                                                    Xactive    Pathbreaker

Direct material                                             $64.00    $50.20

Direct Labor                                                 $17.40     $12.20

Manufacturing overhead ((1.4, 1)*$19.20)   $26.88    $19.20

Unit product cost                                        $108.28  $81.60