Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5]

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	$	120.00		$	80.00
Direct materials per unit	$	64.80		$	50.00
Direct labor per unit	$	13.00		$	10.00
Direct labor-hours per unit		1.3	DLHs		1.0	DLHs
Estimated annual production and sales		26,000	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	$	1,904,400
Estimated total direct labor-hours		105,800	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)	$	581,900		33,800	72,000	105,800
Batch setups (setups)		650,000		370	280	650
Product sustaining (number of products)		600,000		1	1	2
Other		72,500		NA	NA	NA
Total manufacturing overhead cost	$	1,904,400

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 Pathfinder Total Product margin $ 0 Required 1 Required 2 > 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 activity-based costing system. (Round your intermediate calculations to 2 decimal places.) Xtreme Pathfinder Total Product margin $ 0 Complete this question by entering your answers in the tabs below. 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 Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % Indirect costs: % % % % % $ 0 $ 0 $ 0 Total cost assigned to products Costs not assigned to products: Total cost $ 0