Question
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
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 | $ | 175.00 | $ | 125.00 | ||
Direct materials per unit | $ | 68 | $ | 48 | ||
Direct labor per unit | $ | 26 | $ | 15 | ||
Direct labor-hours per unit | 2 | DLHs | 1.0 | DLHs | ||
Estimated annual production and sales | 30,000 | units | 85,000 | 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 | $2,250,000 | ||
Estimated total direct labor-hours | 120,000 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
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