Problem 5-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO5-1, L05-3, LO5-4, LO5-5] Smoky Mountain Corporation makes two types of hiking bootsthe Xtreme and the Pathfinder. Data concerning these two product lines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Xtreme $ 121.00 $ 65.30 $ 13.50 1.5 DLHS 31,000 units $ $ $ Pathfinder 86.00 52.00 9.00 1.0 DLHS 65,000 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 Estimated total direct labor-hours 2,230,000 111,500 DLHS Required: 1. Compute the product margins for the Xtreme and the Pathfinder 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): Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Estimated Overhead Cost $ 724,750 975,000 470,000 60,250 $ 2,230,000 Expected Activity Xtreme Pathfinder Total 46,500 65,000 111,500 420 330 750 1 1 NA NA 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 this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Xtreme 378,200 Pathfinder $ 325,000 Total 703,200 Product margin $ $ Required 1 Required 2 > Required 1 Required 2 Required 3 Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Round your intermediate calculations to 2 decimal places.) Xtreme P athfinder Total Product margin Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place.) Total Xtreme % of Amount Total Amount Pathfinder % of Amount Total Amount Amount Traditional Cost System Total cost assigned to products $ 0 0 Total Xtreme % of Amount Total Amount Pathfinder % of Amount Total Amount Amount Activity-Based Costing System Direct costs: Indirect costs: DI % % $ 0 $ 0 $ Total cost assigned to products Costs not assigned to products: Total cost
