Compute the product margins for the xactive

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Reference no: EM13491686

Comparing Traditional and Activity-Based Product Margins

Rocky Mountain Corporation makes two types of hiking boots-Xactive and the Pathbreaker. Data concerning these two product lines appear below:

2435_table 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:

801_table 2.png

Required:

1. Compute the product margins for the Xactive and the Pathbreaker 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):

2052_table 3.png

Compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assignments differ.

Reference no: EM13491686

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