Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annua1 production and sales Xtreme $ 121.00 $ 64.70 $ 10.80 1.2 DLHS 25,000 units $ 88.00 $ 54.00 9.00 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. 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 Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Expected Activity Xtreme Pathfinder 71,000 270 Overhead Cost Total 30,000 360 606,000 693,000 700,000 21,000 101,000 630 Other NA NA NA Total manufacturing overhead cost $ 2,020,000 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.
Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annua1 production and sales Xtreme $ 121.00 $ 64.70 $ 10.80 1.2 DLHS 25,000 units $ 88.00 $ 54.00 9.00 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. 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 Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Expected Activity Xtreme Pathfinder 71,000 270 Overhead Cost Total 30,000 360 606,000 693,000 700,000 21,000 101,000 630 Other NA NA NA Total manufacturing overhead cost $ 2,020,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Transcribed Image Text:Smoky Mountain Corporation makes two types of hiking boots-the 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
%24
9.00
1.0 DLHS
71,000 units
1.2 DLHS
25, 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 DLH5
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
сараcity costs):
Estimated
Expected Activity
Activities and Activity Measures
Supporting direct labor (direct labor-hours)
Batch setups (setups)
Product sustaining (number of products)
Overhead Cost
Xtreme Pathfinder
Total
71,000
606,000
693,000
700,000
21,000
30,000
101,000
360
270
630
1
2
Other
NA
NA
NA
Total manufacturing overhead cost
$ 2,020,000
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.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2
places and "Percentage" answers to 1 decimal place.)
Xtreme
Pathfinder
Total
% of
% of
Amount
Total Amount
Amount
Total Amount
Amount
Traditional Cost System
%
%
%
%
%
%
Total cost assigned to products
Xtreme
Pathfinder
Total
% of
% of
Amount
Total Amount
Amount
Total Amount
Amount
Activity-Based Costing System
Direct costs:
%
%
%
Indirect costs:
%
%
%
%
%
Total cost assigned to products
Costs not assigned to products:
Total cost
< Required 2
Required 3 >
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