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 Xtrene $118.00 $65.00 $13.50 1.5 D 28,000 units Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost 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 $ 84.00 $ 52.00 $9.00 1.0 DE 65,000 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) $1,819,000 107,000 DLN Estimated Overhead Cost $588,500 690,000 500,000 40,500 $1,819,000 Expected Activity Xtreme Pathfinder Total 42,000 65,000 107,000 390 300 690 1 NA 1 NA NA 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.
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 Xtrene $118.00 $65.00 $13.50 1.5 D 28,000 units Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost 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 $ 84.00 $ 52.00 $9.00 1.0 DE 65,000 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) $1,819,000 107,000 DLN Estimated Overhead Cost $588,500 690,000 500,000 40,500 $1,819,000 Expected Activity Xtreme Pathfinder Total 42,000 65,000 107,000 390 300 690 1 NA 1 NA NA 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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Concept explainers
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Transcribed Image Text: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
$118.00
$65.00
$13.50
1.5 DLHS
28,000 units
Batch setups (setups)
Product sustaining (number of products)
Other
Total manufacturing overhead cost
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
$ 84.00
$ 52.00
$9.00
1.0 Dtla
65,000 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)
$1,819,000
107,000 DEN
Estimated
Overhead Cost
$588,500
690,000
500,000
40,500
$ 1,819,000
Expected Activity
Xtreme Pathfinder
42,000 65,000
390 300
1
1
NA
NA
Total
107,000
690
2
NA
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.
Transcribed Image Text:Traditional Cost System
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 sustaining
Total cost assigned to products
Costs not assigned to products:
Product sustaining
Total cost
$
$
Amount
Xtreme
0
% of
Total Amount
Xtreme
0
%
%
% of
Amount Total Amount
%
%
%
$
$
Pathfinder
Amount
Amount
0
% of
Total Amount
Pathfinder
0
%
%
%
% of
Total Amount
aa
%
%
%
%
%
$
Total
Amount
$
Total
Amount
0
0
0
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