Xtreme Total % of Pathfinder % of Amount Total Amount Amount Total Amount Amount Traditional Cost System % % % % % Total cost assigned to products $ 0 S 0 $ 0 Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs % % % % Indirect costs % % % % % % $ 0 $ 0 $ 0 Total cost assigned to products Costs not assigned to products Total cost $ 0 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 $ 65.10 $10.00 1. DLHS 29,000 units Pathfinder $ 83.00 $50.00 $ 10.00 1.0 DUH 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 Estimated total direct labor-hours $ 1,800,000 100,000 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 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 products) Other Total manufacturing overhead cost Estimated Overhead Cost $ 520,000 781,000 440,000 59,000 $ 1,800,000 Expected Activity Xtreme Pathfinder Total 29,000 71,000 100,000 400 310 710 1 1 2. NA NA Required: 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 products) Other Total manufacturing overhead cost Estimated Overhead Cost $ 520,000 781,000 440,000 59,800 $ 1,800,000 Expected Activity Xtreme Pathfinder Total 29,000 71,000 100,000 400 310 710 1 1 2. NA NA 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
