Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pa
ID: 2392542 • Letter: S
Question
Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below:
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:
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):
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.
Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Round your intermediate calculations to 2 decimal places.)
Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places.)
Xtreme Pathfinder Selling price per unit $ 118.00 $ 84.00 Direct materials per unit $ 65.00 $ 52.00 Direct labor per unit $ 13.50 $ 9.00 Direct labor-hours per unit 1.5 DLHs 1.0 DLHs Estimated annual production and sales 28,000 units 65,000 unitsExplanation / Answer
Smoky mountain corporation
Traditional costing
ABC costing
963000
Calculation of predetermined OH allocation rate
Quantitative Comparision(Horizantal analysis is done)
Xtreme Pathfinder Total DLH 42000 65000 107000 Sales revenue(a) 3304000 5460000 8764000 Less:-Costs Direct materials 1820000 3380000 5200000 Manufacturing OH 714000 1105000 1819000 1819000*42000/107000=714000 Direct labour 378000 585000 963000 Total costs assigned(b) 2912000 5070000 7982000 Product margin(a-b) 392000 390000 782000Related Questions
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