Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfi

Question

Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below Pathfinder $ 91.00 $ 52.00 $ 10.00 Xtreme Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $ 141.00 64.50 $ 17.00 1.7 DLHs 23,000 units 1.0 DLHs 74,000 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: $2,714,400 Estimated total manufacturing overhead Estimated total direct labor-hours 113,100 DLHs Required 1. Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Do not round your intermediate calculations.) Xtreme Pathfinder Total Product margin

Explanation / Answer

1) overhead rate estimated MOH/estimated DLH's 2714,400/113100 24 product margin Xtreme pathfinder total Selling price per unit 141 91 less:Expense Direct materials per unit 64.5 52 Direct labor per unit 17 10 overhead pu (oh rate*DLH's pu) 40.8 24 total unit cost 122.3 86 product margin 18.7 5 23.7 Xtreme pathfinder total product margin 430100 370000 800100 answer 2) overhead rate oh rate amount driver Activity Supporting direct labor 791,700 113,100 7 batch setups 1,062,000 590 1800 product sustaining 790,000 2 395000 allocation of overhead and per unit cost Xtremet Pathfinder Rate driver OH Rate Driver OH Activity Supporting direct labor 7 39,100 273700 7 74,000 518000 batch setups 1800 340 612000 1800 250 450000 product sustaining 395000 1 395000 395000 1 395000 total overhead 1280700 1363000 total production 23,000 74,000 overhead per unit 55.68 18.42 product margin Xtreme pathfinder total Selling price per unit 141 91 less:Expense Direct materials per unit 64.5 52 Direct labor per unit 17 10 overhead pu (oh rate*DLH's pu) 55.68 18.42 total unit cost 137.18 80.42 product margin 3.82 10.58 14.40 Xtreme pathfinder total product margin 87800 783000 870800 answer 3) Xtreme Pathfinder total % of % of Amount total amount Amount total amount Amount Traditional Cost system Direct materials 1483500 27.8% 3848000 72.2% 5331500 direct labor 391000 34.6% 740000 65.4% 1131000 manufacturing overhead 938400 34.6% 1776000 65.4% 2714400 total cost assigned to produts 2812900 6364000 9176900 Xtreme Pathfinder total % of % of Amount total amount Amount total amount Amount Activity based Direct materials 1483500 27.8% 3848000 72.2% 5331500 direct labor 391000 34.6% 740000 65.4% 1131000 indirect costs Supporting direct labor 273700 34.6% 518000 65.4% 791700 batch setups 612000 57.6% 450000 42.4% 1062000 product sustaining 395000 50.0% 395000 50.0% 790000 total cost assigned to products 3155200 5951000 9106200 costs not assigned to products other 70,700 total cost. 9176900

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