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 Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $ 116.00 $ 64.00 $ 12.00 $ 80.00 $ 52.00 8.00 1.5 DLHS 1.0 DLHS 29,000 units 76,000 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 $ 1,912,000 Estimated total direct labor-hours 119,500 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 Expected Activity Overhead Cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Xtreme Pathfinder Total $ 43,500 693,100 539,000 640,000 39,900 76,000 119,500 290 200 490 1 1 2 Other NA NA NA Total manufacturing overhead cost $ 1,912,000 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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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
Direct materials per unit
Direct labor per unit
Direct labor-hours per unit
Estimated annual production and sales
$ 116.00
$ 64.00
$ 12.00
$ 80.00
$ 52.00
$
8.00
1.5 DLHS
1.0 DLHS
29,000 units
76,000 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:
$ 1,912,000
119,500 DLHS
Estimated total manufacturing overhead
Estimated total direct labor-hours
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
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
$
76,000
693,100
539,000
640,000
39,900
43,500
119,500
290
200
490
1
1
2
Other
NA
NA
NA
Total manufacturing overhead cost
$ 1,912,000
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: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 Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $ 116.00 $ 64.00 $ 12.00 $ 80.00 $ 52.00 $ 8.00 1.5 DLHS 1.0 DLHS 29,000 units 76,000 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: $ 1,912,000 119,500 DLHS Estimated total manufacturing overhead Estimated total direct labor-hours 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 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 $ 76,000 693,100 539,000 640,000 39,900 43,500 119,500 290 200 490 1 1 2 Other NA NA NA Total manufacturing overhead cost $ 1,912,000 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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