Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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 $ 121.00 $ 91.00
Direct materials per unit $ 63.70 $ 56.00
Direct labor per unit $ 8.80 $ 8.00
Direct labor-hours per unit 1.1 DLHs 1.0 DLHs
Estimated annual production and sales 26,000 units 73,000 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 $ 2,133,600
Estimated total direct labor-hours 101,600 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):

Activities and Activity Measures Estimated Overhead Cost Expected Activity
Xtreme Pathfinder Total
Supporting direct labor (direct labor-hours) $ 629,920 28,600 73,000 101,600
Batch setups (setups) 768,000 260 220 480
Product sustaining (number of products) 710,000 1 1 2
Other 25,680 NA NA NA
Total manufacturing overhead cost $ 2,133,600

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.

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

Financial & Managerial Accounting

Authors: Carl Warren

12th Edition

1285534646, 978-1133952428

More Books

Students also viewed these Accounting questions