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 Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Xtreme $120.00 $ 63.60 $ 12.00 Pathfinder S 87.00 $ 55.00 $ 10.00 1.2 DLHs 25,000 units 1.0 DLHs 72,000 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 $2,040,000 102,000 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) Extreme Pathfinder Total Particulars P.U Total P.U Total a) Selling price 120 3000000 87 6264000 Direct material 63.6 1590000 55 3960000 Direct labour 12 300000 10 720000 manufacturing OH 24 600000 20 1440000 b) Cost of Production 2490000 6120000 c) = a)-b) Profit margin 510000 144000 654000 2) Aportionment of manufacturing OH Based on Activity base Extreme Pathfinder Particulars Cost Per activity No of activities Total No of activities Total Supporting direct labour 6.1 30000 183000 72000 439200 Batch Setups 1400 250 350000 210 294000 Product sustaining 350000 1 350000 1 350000 Apportinment of cost 883000 1083200 Extreme Pathfinder Total Particulars P.U Total P.U Total a) Selling price 120 3000000 87 6264000 Direct material 63.6 1590000 55 3960000 Direct labour 12 300000 10 720000 manufacturing OH 883000 1083200 b) Cost of Production 2773000 5763200 c) = a)-b) Profit margin 227000 500800 727800 Less: Others -73800 Net Profit margin 654000 3) Extreme Pathfinder Particulars Amount % of Total Amount Amount % of Total Amount Direct material 1590000 63.9% 3960000 64.7% Direct labour 300000 12.0% 720000 11.8% manufacturing OH 600000 24.1% 1440000 23.5% Cost of Production 2490000 100% 6120000 100% 4) Extreme Pathfinder Total Particulars Amount % of Total Amount Amount % of Total Amount Direct material 1590000 57.3% 3960000 68.7% 5550000 Direct labour 300000 10.8% 720000 12.5% 1020000 manufacturing OH Supporting direct labour 183000 6.6% 439200 7.6% 622200 Batch Setups 350000 12.6% 294000 5.1% 644000 Product sustaining 350000 12.6% 350000 6.1% 700000 2773000 5763200 Others not assigned to products 73800 Total Cost 8610000

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