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 $140.00 $72.00 $24.00 Pathfinder $ 99.00 $53.00 $ 12.00 2.0 DLHs 20,000 units 1.0 DLHs 80,000 units mpany has a traditional costing system in which manufacturing overhead is applied to units based on e co 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 $1,980,000 120,000 DLHs Required 1. Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places.) Xtreme Pathfinder Total Product margin$ 220,000 220,000

Explanation / Answer

Answer 1. Statement of Product Margin Under Traditional Costing System Xtreme Pathfinder Total No Of Units Sold 20000 80000 100000 Sales (A) 2800000 7920000 10720000 Expenses Direct Material 1440000 4240000 5680000 Direct Labour 480000 960000 1440000 Manufacturing Overhead 660000 1320000 1980000 Total Expenses (B) 2580000 6520000 9100000 Profit (A-B) 220000 1400000 1620000 Answer 2. Statement of Product Margin Under Activity Based Costing System Xtreme Pathfinder Total No Of Units Sold 20000 80000 100000 Sales (A) 2800000 7920000 10720000 Direct Costs Direct Material 1440000 4240000 5680000 Direct Labour 480000 960000 1440000 Indirect Costs Supporting Direct Labour 261200 522400 783600 Batch Setups 330000 165000 495000 Product sustaining 301200 301200 602400 Total Cost Assigned to product (B) 2812400 6188600 9001000 Profit (A-B) -12400 1731400 1719000 Less: Cost not assigned to product Other 0 0 99000 Net Profit 1620000 Answer 3. Xtreme Pathfinder Total Amount % of Total Amt Amount % of Total Amt Amount 10720000 Traditional Cost System Direct Material 1440000 25.40% 4240000 74.60% 5680000 Direct Labour 480000 33.30% 960000 66.70% 1440000 Manufacturing Overhead 660000 33.30% 1320000 66.70% 1980000 Total Expenses (B) 2580000 28.40% 6520000 71.60% 9100000 Xtreme Pathfinder Total Amount % of Total Amt Amount % of Total Amt Amount Activity Based Costing System Direct Costs Direct Material 1440000 25.40% 4240000 74.60% 5680000 Direct Labour 480000 33.30% 960000 66.70% 1440000 Indirect Costs Supporting Direct Labour 261200 33.30% 522400 66.70% 783600 Batch Setups 330000 66.70% 165000 33.30% 495000 Product sustaining 301200 50% 301200 50% 602400 Total Cost Assigned to product (B) 2812400 31.20% 6188600 68.80% 9001000 Less: Cost not assigned to product 0 31.24541718 0 Other 99000 Total Cost 9100000

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