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 $ 121.00 $ 65.30 $13.50 1.5 DLHS 31,000 units Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Pathfinder 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: $ 86.00 $ 52.00 $ 9.00 1.0 DLHS 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): $ 2,230,000 111,500 DLHS Estimated Overhead Cost Expected Activity Xtreme Pathfinder $ 724,750 46,500 65,000 975,000 420 330 470,000 1 1 60,250 ΝΑ ΝΑ $ 2,230,000 Total 111,500 750 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.
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 $ 121.00 $ 65.30 $13.50 1.5 DLHS 31,000 units Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Pathfinder 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: $ 86.00 $ 52.00 $ 9.00 1.0 DLHS 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): $ 2,230,000 111,500 DLHS Estimated Overhead Cost Expected Activity Xtreme Pathfinder $ 724,750 46,500 65,000 975,000 420 330 470,000 1 1 60,250 ΝΑ ΝΑ $ 2,230,000 Total 111,500 750 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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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
$ 121.00
$ 65.30
$ 13.50
1.5 DLHS
31,000 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
$ 86.00
$ 52.00
$ 9.00
1.0 DLHS
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):
$ 2,230,000
111,500 DLHS
Estimated
Overhead Cost
$
Expected Activity
Xtreme Pathfinder
724,750 46,500 65,000
975,000
420
330
470,000
1
1
60,250
ΝΑ
ΝΑ
$ 2,230,000
Total
111,500
750
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.
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