Reference no: EM13606429

Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit $159 $109 Direct materials per unit $63 $42 Direct labor per unit $20 $30 Direct labor-hours per unit 2 DLHs 3 DLHs Estimated annual production 12,000 units 72,000 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 $4,056,000 Estimated total direct labor-hours 240,000 DLHs

Requirement 1:

(a) Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the "tiny_mce_markerquot; 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 "tiny_mce_markerquot; sign in your response.) Xtreme Pathfinder Total 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): Expected Activity Activities and Activity Measures Estimated Overhead cost Xtreme Pathfinder Total Supporting direct labor (direct labor-hours) $1,399,200 24,000 216,000 240,000 Batch setups (setups) 468,300 110 190 300 Product sustaining (number of products) 556,400 3 3 6 Other 1,632,100 NA NA NA Total manufacturing overhead cost $4,056,000 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 "tiny_mce_markerquot; sign in your response.) Xtreme Pathfinder Total 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 "tiny_mce_markerquot; & "%" signs in your response.) Xtreme Pathfinder Total Traditional Cost System Amount % % Amount Direct materials $ % $ % $ Direct labor % % Manufacturing overhead % % Total cost assigned to products $ $ $ Activity-Based Costing System Direct costs: Direct materials $ % $ % $ Direct labor % % Indirect costs: Supporting direct labor % % Batch setups % % Product sustainin