Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below:  XtremePathfinderSelling price per unit$132.00 $94.00 Direct materials per unit$64.60 $53.00 Direct labor per unit$9.60 $8.00 Direct labor-hours per unit 1.2DLHs 1.0DLHsEstimated annual production and sales 24,000units 70,000units  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$2,470,000 Estimated total direct labor-hours 98,800DLHs  Required:1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system.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):  EstimatedOverhead CostExpected ActivityActivities and Activity MeasuresXtremePathfinderTotalSupporting direct labor (direct labor-hours)$642,200 28,80070,00098,800Batch setups (setups) 915,000 350260610Product sustaining (number of products) 840,000 112Other 72,800 NANANATotal manufacturing overhead cost$2,470,000      Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Question
Asked Mar 6, 2019
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Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below:

 

  Xtreme Pathfinder
Selling price per unit $ 132.00   $ 94.00  
Direct materials per unit $ 64.60   $ 53.00  
Direct labor per unit $ 9.60   $ 8.00  
Direct labor-hours per unit   1.2 DLHs   1.0 DLHs
Estimated annual production and sales   24,000 units   70,000 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 $ 2,470,000  
Estimated total direct labor-hours   98,800 DLHs
 

 

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system.

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
Overhead Cost
Expected Activity
Activities and Activity Measures Xtreme Pathfinder Total
Supporting direct labor (direct labor-hours) $ 642,200   28,800 70,000 98,800
Batch setups (setups)   915,000   350 260 610
Product sustaining (number of products)   840,000   1 1 2
Other   72,800   NA NA NA
Total manufacturing overhead cost $ 2,470,000        
 

 

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

 

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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We shall answer the first question since the exact one wasn’t specified. Please submit a new question specifying the one you did like to get answered.

Step 2

Calculating the value of manufacturing overhead per unit. We have,

 

Manufacturing overhead per unit = Estimated total manufacturing overhead / Est...

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