Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins L07-1, LO7-3, L07-4. LO7-5 Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder.

image text in transcribed
PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins L07-1, LO7-3, L07-4. LO7-5 Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor hours per unit Estimated annual production and sales $140.00 $72.00 $24.00 20 DLHS 20,000 units $99.00 $53.00 $12.00 1.0 DLHs 80,000 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 $1,980,000 120.000 DLHS Required: 1. Using Exhibit 7-13 as a guide, compute the product margins for the Xtreme and the Path- finder 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 activ- ity 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 Expected Activity Estimated Overhead Cost Xtreme Pathfinder Total $ 783,600 40.000 80.000 120.000 495,000 200 100 300 602,400 1 1 2 99.000 NA NA NA $1,980,000 . Using Exhibit 7-11 as a guide, compute the product margins for the Xtreme and the Path- finder products under the activity-based costing system. 3. Using Exhibit 7-14 a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assign- ments differ

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Hospitality Industry Managerial Accounting

Authors: Raymond S. Schmidgall

8th Edition

0866124977, 9780866124973

More Books

Students also viewed these Accounting questions

Question

What are the pros and cons regarding Angelica joining the union?

Answered: 1 week ago