Smoky Mountain Corporation makes two types of hikingbootsâXtreme and the Pathfinder. Data concerning these two productlines appear below:
Xtreme Pathfinder Selling price per unit $ 124.00 $ 88.00 Direct materials per unit $ 63.40 $ 53.00 Direct labor per unit $ 14.40 $ 8.00 Direct labor-hours per unit 1.8 DLHs 1.0 DLHs Estimated annual production and sales 23,000 units 70,000 units
The company has a traditional costing system in whichmanufacturing overhead is applied to units based on directlabor-hours. Data concerning manufacturing overhead and directlabor-hours for the upcoming year appear below:
Estimated total manufacturing overhead $2,005,200 Estimated total direct labor-hours 111,400 DLHs
Required: 1. Compute the product margins for the Xtreme and the Pathfinderproducts under the companyâs traditional costing system.(Do not round your intermediate calculations.)
2. The company is considering replacing its traditional costingsystem with an activity-based costing system that would assign itsmanufacturing overhead to the following four activity cost pools(the Other cost pool includes organization-sustaining costs andidle capacity costs):
Estimated
Expected Activity
Activities and Activity Measures Overhead Cost Xtreme Pathfinder Total Supporting direct labor (direct labor-hours) $ 712,960 41,400 70,000 111,400 Batch setups (setups) 504,000 230 190 420 Product sustaining (number of products) 740,000 1 1 2 Other 48,240 NA NA NA Total manufacturing overhead cost $ 2,005,200
Compute the product margins for the Xtreme and the Pathfinderproducts under the activity-based costing system. (Negativeproduct margins should be indicated with a minus sign. Round yourintermediate calculations to 2 decimal places.)
3. Prepare a quantitative comparison of the traditional andactivity-based cost assignments. (Do not round intermediatecalculations. Round your "Percentage" answer to 1 decimal place.(i.e. .1234 should be entered as 12.3))
Smoky Mountain Corporation makes two types of hikingbootsâXtreme and the Pathfinder. Data concerning these two productlines appear below:
| Xtreme | Pathfinder | |||||
| Selling price per unit | $ | 124.00 | $ | 88.00 | ||
| Direct materials per unit | $ | 63.40 | $ | 53.00 | ||
| Direct labor per unit | $ | 14.40 | $ | 8.00 | ||
| Direct labor-hours per unit | 1.8 | DLHs | 1.0 | DLHs | ||
| Estimated annual production and sales | 23,000 | units | 70,000 | units | ||
The company has a traditional costing system in whichmanufacturing overhead is applied to units based on directlabor-hours. Data concerning manufacturing overhead and directlabor-hours for the upcoming year appear below: |
| Estimated total manufacturing overhead | $2,005,200 | ||
| Estimated total direct labor-hours | 111,400 DLHs | ||
| Required: | |
| 1. | Compute the product margins for the Xtreme and the Pathfinderproducts under the companyâs traditional costing system.(Do not round your intermediate calculations.) |
| 2. | The company is considering replacing its traditional costingsystem with an activity-based costing system that would assign itsmanufacturing overhead to the following four activity cost pools(the Other cost pool includes organization-sustaining costs andidle capacity costs): |
| Estimated | Expected Activity | ||||
| Activities and Activity Measures | Overhead Cost | Xtreme | Pathfinder | Total | |
| Supporting direct labor (direct labor-hours) | $ | 712,960 | 41,400 | 70,000 | 111,400 |
| Batch setups (setups) | 504,000 | 230 | 190 | 420 | |
| Product sustaining (number of products) | 740,000 | 1 | 1 | 2 | |
| Other | 48,240 | NA | NA | NA | |
| Total manufacturing overhead cost | $ | 2,005,200 | |||
Compute the product margins for the Xtreme and the Pathfinderproducts under the activity-based costing system. (Negativeproduct margins should be indicated with a minus sign. Round yourintermediate calculations to 2 decimal places.) |
| 3. | Prepare a quantitative comparison of the traditional andactivity-based cost assignments. (Do not round intermediatecalculations. Round your "Percentage" answer to 1 decimal place.(i.e. .1234 should be entered as 12.3)) |
Related questions
Smoky Mountain Corporation makes two types of hiking bootsâthe Xtreme and the Pathfinder. Data concerning these two product lines appear below:
| Xtreme | Pathfinder | |||||
| Selling price per unit | $ | 120.00 | $ | 92.00 | ||
| Direct materials per unit | $ | 63.50 | $ | 54.00 | ||
| Direct labor per unit | $ | 13.50 | $ | 9.00 | ||
| Direct labor-hours per unit | 1.5 | DLHs | 1.0 | DLHs | ||
| Estimated annual production and sales | 24,000 | 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 | $ | 2,033,000 | ||
| Estimated total direct labor-hours | 107,000 | DLHs | ||
Required:
1. Compute the product margins for the Xtreme and the Pathfinder products under the companyâs 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):
| Estimated Overhead Cost | Expected Activity | |||||
| Activities and Activity Measures | Xtreme | Pathfinder | Total | |||
| Supporting direct labor (direct labor-hours) | $ | 663,400 | 36,000 | 71,000 | 107,000 | |
| Batch setups (setups) | 572,000 | 240 | 200 | 440 | ||
| Product sustaining (number of products) | 750,000 | 1 | 1 | 2 | ||
| Other | 47,600 | NA | NA | NA | ||
| Total manufacturing overhead cost | $ | 2,033,000 | ||||
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.
Smoky Mountain Corporation makes two types of hikingboots%u2014Xtreme and the Pathfinder. Data concerning these twoproduct lines appear below: |
| Xtreme | Pathfinder | |
| Selling price per unit | $141 | $103 |
| Direct materials per unit | $59 | $45 |
| Direct labor per unit | $36 | $36 |
| Direct labor-hours per unit | 3 DLHs | 3 DLHs |
| Estimated annual production | 13,000 units | 74,000 units |
The company has a traditional costing system in which manufacturingoverhead is applied to units based on direct labor-hours. Dataconcerning manufacturing overhead and direct labor-hours for theupcoming year appear below: |
| Estimated total manufacturing overhead | $4,332,600 |
| Estimated total direct labor-hours | 261,000 DLHs |
| | |
| Requirement 2: |
The company is considering replacing its traditional costing systemwith an activity-based costing system that would assign itsmanufacturing overhead to the following four activity cost pools(the Other cost pool includes organization-sustaining costs andidle capacity costs): |
| Expected Activity | ||||
| Activities and Activity Measures | Estimated Overhead cost | Xtreme | Pathfinder | Total |
| Supporting direct labor (direct labor-hours) | $1,860,930 | 39,000 | 222,000 | 261,000 |
| Batch setups (setups) | 468,900 | 110 | 190 | 300 |
| Product sustaining (number of products) | 555,800 | 1 | 3 | 4 |
| Other | 1,446,970 | NA | NA | NA |
| Total manufacturing overhead cost | $4,332,600 | |||
Compute the product margins for the Xtreme and the Pathfinderproducts under the activity-based costing system. (Negative amount should be indicated by a minus sign. Do not roundyour intermediate calculations. Omit the "$" sign in yourresponse.) |
| Xtreme | Pathfinder | Total | |
| Product margin | $ | $ | $ |
