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 $121.00 63.70 $ 8.80 Pathfinder $91.00 $56.00 $ 8.00 1.1 DLHs 26,000 units 1.0 DLHs 73,000 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 $2,133,600 101,600 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./

2./

3./

TRADITIONAL COST SYSTEM

ACTIVITY BASED COSTING

71.85

XTEEREME PATHFINDER TOTAL SALES $3146000 $6643000 $9789000 LESS DIRECT MATERIAL COST ($1656200) ($4088000) ($5744200) LESS DIRECT LABOUR COST ($228800) ($584000) ($812800) LESS MANUFACTURING OVERHEAD ($600600) ($1533000) ($2133600) PRODUCT MARGIN $660400 $438000 $1098400

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