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: Xtreme $121.00 $64.70 $ 10.80 Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $88.00 54.00 $9.00 1.2 DLHs 25,000 units 1.0 DLHs 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 Estimated total direct labor-hours $2,020,000 101,000 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. Product Margin ( Traditional costing):

2. Product Margin ( Activity based costing):

Xtreme Pathfinder Total Sales revenue 3,025,000 6,248,000 9,273,000 Less Direct material 1,617,500 3,834,000 5,451,500 Direct labor 270,000 639,000 909,000 Manufacturing overhead 600,000 1,420,000 2,020,000 Product margin 537,500 355,000 892,500

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