Question

Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder $ 91.00 $ 56.00 $ 8.00 $ 121.00 $ 63.70 2$ Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and 8.80 1.1 DLHS 1.0 DLHS sales 26,000 units 73,000 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: $2,133,600 Estimated total manufacturing overhead Estimated total direct labor-hours 101,600 DLHS Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. (Do not round your intermediate calculations.) Answer is complete but not entirely correct. Pathfinder Xtreme Total Product margin $ 660,4000 $ 483,000X $ 1,143,400

Answer 1

solution: 1) product margin under traditional system sales Xtreme 3,146,000 Pathfinder 6,643,000 Total 9,789,000 Direct materials Direct labor Manufacturing overhead applied @21 per DLH** total manufacturing cost 1,656,200 228,800 600,600 2,485,600 4,088,000 584,000 1,533,000 6,205,000 5,744,200 812,800 2,133,600 8,690,600 Product margin | 660,400 438,000 1,098,400 21.00 **overhead rate (2133600/101600) 2) product margin under ABC sales Xtreme 3,146,000 Pathfinder 6,643,000 Total 9,789,000 *working Supporting direct labor Batch setups Product-sustaining Xtreme 40000*8 310*1100 390000*1 Pathfinder 71000*8 220*1100 390000*1 | L Direct materials Direct labor Supporting direct labor* Batch setups* Product-sustaining * total manufacturing cost 1,656,200 228,800 177,320 416,000 355,000 2,833,320 4,088,000 584,000 452,600 352,000 355,000 5,831,600 5,744,200 812,800 629,920 768,000 710,000 8,664,920 activity rate Calculation of activity rate Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead Total Supporting direct labor 629920 101600 Batch setups 768000 480 Product-sustaining 710000 2 6.20 1,600 355,000 Product margin 312,680 811,400 1,124,080 Sheet537 Sheet538 Sheet539 Sheet540 Sheet541 Sheet542 Sheet543 Sheet544 Sheet545 I I I ENG 22:25 TUUS 27/01/2020

3) comparision Xtreme Pathfinder Total amount amount Traditional cost system Direct materials Direct labor Manufacturing overhead applied total cost assigned to product 1,656,200 228,800 600,600 2,485,600 % of total amount 28.8% 28.1% 28.1% 4,088,000 584,000 1,533,000 6,205,000 % of total amount 71.2% 71.9% 71.9% 5,744,200 812,800 2,133,600 8,690,600 Xtreme Pathfinder Total amount % of total amount amount % of total amount 1,656,200 228,800 28.8% 28.1% 4,088,000 584,000 71.2% 71.9% 5,744,200 812,800 | Activity based costing direct cost Direct materials Direct labor Indirect cost Supporting direct labor Batch setups Product-sustaining total cost assigned to product cost not assigned to product Other total cost 177,320 416,000 355,000 2,833,320 28.1% 54.2% 50.0% 452,600 352,000 355,000 5,831,600 71.9% 45.8% 50.0% 629,920 768,000 710,000 8,664,920 25,680 8,690,600