Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Estimated total manufacturing overhead Estimated total direct labor-hours Xtreme $116.00 $ 64.00 $ 12.00 1.5 DLHS 29,000 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: Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Pathfinder $ 80.00 $ 52.00 $ 8.00 1.0 DLHS 76,000 units 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): $ 1,912,000 119,500 DLHs Estimated Overhead Cost 693,100 $ 539,000 640,000 39,900 $ 1,912,000 Expected Activity Xtreme Pathfinder 43,500 76,000 290 200 1 1 ΝΑ ΝΑ Total 119,500 490 2 ΝΑ 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.
Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Estimated total manufacturing overhead Estimated total direct labor-hours Xtreme $116.00 $ 64.00 $ 12.00 1.5 DLHS 29,000 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: Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Pathfinder $ 80.00 $ 52.00 $ 8.00 1.0 DLHS 76,000 units 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): $ 1,912,000 119,500 DLHs Estimated Overhead Cost 693,100 $ 539,000 640,000 39,900 $ 1,912,000 Expected Activity Xtreme Pathfinder 43,500 76,000 290 200 1 1 ΝΑ ΝΑ Total 119,500 490 2 ΝΑ 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4,
LO7-5]
Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product
lines appear below:
Selling price per unit
Direct materials per unit
Direct labor per unit.
Direct labor-hours per unit
Estimated annual production and sales
Estimated total manufacturing overhead
Estimated total direct labor-hours
$116.00
$
$
Xtreme
Batch setups (setups)
Product sustaining (number of products)
Other
Total manufacturing overhead cost
64.00
12.00
1.5 DLHS
29,000 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:
Activities and Activity Measures
Supporting direct labor (direct labor-hours)
Pathfinder
$ 80.00
$ 52.00
$
8.00
1.0 DLHS
76,000 units
$ 1,912,000
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
Overhead Cost
$
693,100
539,000
640,000
39,900
$ 1,912,000
Expected Activity
Xtreme Pathfinder Total
43,500 76,000 119,500
290
200
490
1
1
2
ΝΑ
ΝΑ
ΝΑ
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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Transcribed Image Text:Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4,
LO7-5]
Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product
lines appear below:
Selling price per unit
Direct materials per unit
Direct labor per unit.
Direct labor-hours per unit
Estimated annual production and sales
Estimated total manufacturing overhead
Estimated total direct labor-hours
$116.00
$
$
Xtreme
Batch setups (setups)
Product sustaining (number of products)
Other
Total manufacturing overhead cost
64.00
12.00
1.5 DLHS
29,000 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:
Activities and Activity Measures
Supporting direct labor (direct labor-hours)
Pathfinder
$ 80.00
$ 52.00
$
8.00
1.0 DLHS
76,000 units
$ 1,912,000
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
Overhead Cost
$
693,100
539,000
640,000
39,900
$ 1,912,000
Expected Activity
Xtreme Pathfinder Total
43,500 76,000 119,500
290
200
490
1
1
2
ΝΑ
ΝΑ
ΝΑ
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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