| Smoky Mountain Corporation makes two types of hiking bootsXtreme and the Pathfinder. Data concerning these two product lines appear below: | | | Xtreme | Pathfinder | | Selling price per unit | $ | 120.00 | | $ | 87.00 | | | Direct materials per unit | $ | 63.30 | | $ | 52.00 | | | Direct labor per unit | $ | 17.00 | | $ | 10.00 | | | Direct labor-hours per unit | | 1.7 | DLHs | | 1.0 | DLHs | | Estimated annual production and sales | | 22,000 | units | | 76,000 | 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 | $1,927,800 | | Estimated total direct labor-hours | 113,400 DLHs | | | | Required: | | 1. | Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system. (Do not round your intermediate calculations.) | | | | | 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 | Expected Activity | | Activities and Activity Measures | Overhead Cost | Xtreme | Pathfinder | Total | | Supporting direct labor (direct labor-hours) | $ | 703,080 | 37,400 | 76,000 | 113,400 | | Batch setups (setups) | | 480,000 | 220 | 180 | 400 | | Product sustaining (number of products) | | 700,000 | 1 | 1 | 2 | | Other | | 44,720 | NA | NA | NA | | | | | | | | | Total manufacturing overhead cost | $ | 1,927,800 | | | | | | | | | | | | | | Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative product margins should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places.) | | | | 3. | Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3)) | | | | |
