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 | $ | 115.00 | $ | 83.00 | |||
Direct materials per unit | $ | 65.10 | $ | 50.00 | |||
Direct labor per unit | $ | 10.00 | $ | 10.00 | |||
Direct labor-hours per unit | 1.0 | DLHs | 1.0 | DLHs | |||
Estimated annual production and sales | 29,000 | units | 71,000 | 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 | $ | 1,800,000 | ||
Estimated total direct labor-hours | 100,000 | 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.)
Xtreme | Pathfinder | total | |
Product margin |
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 | Activity | ||||||||||||
Activities and Activity Measures | Overhead Cost | Xtreme | Pathfinder | Total | |||||||||
Supporting direct labor (direct labor-hours) | $ | 520,000 | 29,000 | 71,000 | 100,000 | ||||||||
Batch setups (setups) | 781,000 | 400 | 310 | 710 | |||||||||
Product sustaining (number of products) | 440,000 | 1 | 1 | 2 | |||||||||
Other | 59,000 | NA | NA | NA | |||||||||
Total manufacturing overhead cost | $ | 1,800,000 | |||||||||||
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.)
xtreme | pathfinder | total | |
product margin |
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