Question
1. Smoky Mountain Corporation makes two types of hiking bootsthe Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling
1.
Smoky Mountain Corporation makes two types of hiking bootsthe Xtreme and the Pathfinder. Data concerning these two product lines appear below:
Xtreme | Pathfinder | |||||
Selling price per unit | $ | 130.00 | $ | 91.00 | ||
Direct materials per unit | $ | 64.30 | $ | 50.00 | ||
Direct labor per unit | $ | 11.20 | $ | 8.00 | ||
Direct labor-hours per unit | 1.4 | DLHs | 1.0 | DLHs | ||
Estimated annual production and sales | 21,000 | units | 72,000 | 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 | $ | 2,230,800 | ||
Estimated total direct labor-hours | 101,400 | DLHs | ||
Required:
1. Compute the product margins for the Xtreme and the Pathfinder products under the companys 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):
Estimated Overhead Cost | Expected Activity | |||||
Activities and Activity Measures | Xtreme | Pathfinder | Total | |||
Supporting direct labor (direct labor-hours) | $ | 699,660 | 29,400 | 72,000 | 101,400 | |
Batch setups (setups) | 660,000 | 320 | 230 | 550 | ||
Product sustaining (number of products) | 780,000 | 1 | 1 | 2 | ||
Other | 91,140 | NA | NA | NA | ||
Total manufacturing overhead cost | $ | 2,230,800 | ||||
Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.
3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.
Complete LNIS question by entering your anSwers m the tabs belovw. Required 1 Required Required 3 Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Ro your intermediate calculations to 2 decimal places.) Xtreme Pathfinder Total Product margin $1,213,200 $ 1,213,200 Required 3 Requ Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calcu decimal places and "Percentage" answers to 1 decimal place.) Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Traditional Cost System % % Total cost assigned to products 0 0 0 Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % Indirect costs: % Activity-Based Costing System Direct costs: % Indirect costs % % Total cost assigned to products Costs not assigned to products: Total cost Required 2 Required 3 EA
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