Rocky Mountain Corporation makes two types of hiking boots- Xactive and Pathbreaker, data concerning these two product lines appear below:
Xactive Pathbreaker
selling price per unit $127 $89
direct materials per unit $64.80 $51
direct labor per unit $18.20 $13
direct labor-hours per unit 1.4 DLHs 1.0DLHs
Estimated annual production and sales 25,000 unnits 75,000 units
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. Compute the product margins for the Xactive and the Pathbreaker products under the company's traditional costing system.