Smoky Mountain Corporation makes two types of hiking boots"Xtreme and the Pathfinder. Data concerning these two product lines appear below:

 

 XactivePathbreaker
Selling price per unit$127.00 $89.00 
Direct materials per unit$64.80 $51.00 
Direct labor per unit$18.20 $13.00 
Direct labor-hours per unit 1.4DLHs 1.0DLHs
Estimated annual production and sales 25,000units 75,000units



 

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 $2,200,000
Estimated total direct labor-hours 110,000 DLHs

Requirement 1:
(a)
Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Predetermined overhead rate $

(b)
Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Negative amount should be indicated by a minus sign. Round your predetermined overhead rate to 2 decimal places. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Xtreme
Product margin - ?

 

Pathfinder

Product margin - ?

Requirement 2:
The company is considering replacing its traditional costing system with an activity-based costing system that would assign its manufacturing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs):


 

 

 

Estimated

Expected Activity

Activities and Activity MeasuresOverhead CostXactivePathbreakerTotal
Supporting direct labor (direct labor-hours)$797,50035,00075,000110,000
Batch setups (setups) 680,000250150400
Product sustaining (number of products) 650,000112
Other 72,500NANANA
 

   
Total manufacturing overhead cost$2,200,000   
 



   

 

 

 



Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative amount should be indicated by a minus sign. Do not round your intermediate calculations. Omit the "$" sign in your response.)

Xtreme
Product margin - ?

Pathfinder
Product margin -?

 

Requirement 3:
Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your intermediate calculations. Round your predetermined overhead rate to 2 decimal places. Round your percentage values to 1 decimal places and round all other values to the nearest whole number. Omit the "$" & "%" signs in your response.)


 

 XactivePathbreakerTotal
 Amount% of
Total Amount
Amount% of
Total Amount
Amount
Traditional Cost System     
(Click to select)Supporting direct laborSelling and administrativeOtherDirect materialsBatch setupsProduct sustaining$%$%$
(Click to select)Direct laborBatch setupsOtherProduct sustainingSelling and administrativeSupporting direct labor % % 
(Click to select)OtherManufacturing overheadSelling and administrativeProduct sustainingBatch setupsSupporting direct labor % % 
 
 
 
Total cost assigned to products$ $ $
 

 

 

      
Activity-Based Costing System     
Direct costs:     
(Click to select)Batch setupsSelling and administrativeSupporting direct laborProduct sustainingDirect materialsManufacturing overhead$%$%$
(Click to select)Supporting direct laborBatch setupsSelling and administrativeManufacturing overheadProduct sustainingDirect laborOther % % 
Indirect costs:     
(Click to select)Direct laborOtherSelling and administrativeManufacturing overheadDirect materialsSupporting direct labor % % 
(Click to select)Manufacturing overheadOtherSelling and administrativeBatch setupsDirect laborDirect materials % % 
(Click to select)OtherSelling and administrativeDirect laborManufacturing overheadProduct sustainingDirect materials % % 
 
 
 
Total cost assigned to products$ $ $
 

 

  
Costs not assigned to products:     
(Click to select)Direct laborDirect materialsSupporting direct laborBatch setupsOtherProduct sustaining     
     
Total cost    $
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    Smoky Mountain Corporation Answer
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