Problem 7-17 Comparing Traditional and Activity-Based Product Margins [LO7-1, 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: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Xtreme $ 115.00 $ 65.40 $ 16.00 1.6 DLHS 32,000 units Pathfinder $ 85.00 $ 53.00 $ 10.00 1.0 DLHS 60,000 unita 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 $ 1,279,200 111,200 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 considerina replacina its traditional costina svstem with an activity-based costina svstem that would assian its 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 producta) Other Total manufacturing overhead cost Estimated Overhead Coat $ 556,000 770,000 400,000 53,200 $ 1,779,200 Expected Activity Xtreme Pathfinder Total 51,200 60,000 111,200 430 770 1 2 NA NA NA 340 1 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 marains for the Xtreme and the Pathfinder products under the company's traditional costing system. Compute the product margins for the Xtreme and the Pathfinder products und 3. Prepare a quantitative comparison of the traditional and activity-based cost 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 th (Round your intermediate calculations to 2 decimal places and final answers to the Xtreme Pathfinder Total Product margin Compute the product margins for the Xtreme and the Pathfinder products under the ac 3. Prepare a quantitative comparison of the traditional and activity-based cost assignme 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- your intermediate calculations to 2 decimal places.) Xtreme Pathfinder Total Product margin Xtreme Total % of Total Amount Pathfinder % of Amount Total Amount Amount Amount Traditional Cost System % % % % % % Total cost assigned to products Xtreme Total % of Total Amount Pathfinder % of Amount Total Amount Amount Amount Activity-Based Costing System Direct costs: % % % % Indirect costs: % % % % % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % Indirect costs: % % % % % % Total cost assigned to products Costs not assigned to products: Total cost
