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					$