Reference no: EM13337342
Smoky Mountain Corporation makes two types of hiking boots"Xtreme and the Pathfinder. Data concerning these two product lines appear below:
|
Xactive |
Pathbreaker |
| 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 |
|
1.4 |
DLHs |
|
1.0 |
DLHs |
| Estimated annual production and sales |
|
25,000 |
units |
|
75,000 |
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 $2,200,000
Estimated total direct labor-hours 110,000 DLHs
Requirement 1:
(a) Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "$" 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 Measures |
Overhead Cost |
Xactive |
Pathbreaker |
Total |
| Supporting direct labor (direct labor-hours) |
$ |
797,500 |
35,000 |
75,000 |
110,000 |
| Batch setups (setups) |
|
680,000 |
250 |
150 |
400 |
| Product sustaining (number of products) |
|
650,000 |
1 |
1 |
2 |
| Other |
|
72,500 |
NA |
NA |
NA |
|
|
|
|
|
|
| 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.)
|
Xactive |
Pathbreaker |
Total |
|
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 |
|
|
|
|
$ |
|
|
|
|
|
|
|