Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $ 116.00 $ 64.00 $ 12.00 $ 80.00 $ 52.00 8.00 1.5 DLHS 1.0 DLHS 29,000 units 76,000 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 $ 1,912,000 Estimated total direct labor-hours 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 Expected Activity Overhead Cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Xtreme Pathfinder Total $ 43,500 693,100 539,000 640,000 39,900 76,000 119,500 290 200 490 1 1 2 Other NA NA NA Total manufacturing overhead cost $ 1,912,000 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: Xtreme Pathfinder Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales $ 116.00 $ 64.00 $ 12.00 $ 80.00 $ 52.00 8.00 1.5 DLHS 1.0 DLHS 29,000 units 76,000 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 $ 1,912,000 Estimated total direct labor-hours 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 Expected Activity Overhead Cost Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Xtreme Pathfinder Total $ 43,500 693,100 539,000 640,000 39,900 76,000 119,500 290 200 490 1 1 2 Other NA NA NA Total manufacturing overhead cost $ 1,912,000 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:
Xtreme
Pathfinder
Selling price per unit
Direct materials per unit
Direct labor per unit
Direct labor-hours per unit
Estimated annual production and sales
$ 116.00
$ 64.00
$ 12.00
$ 80.00
$ 52.00
$
8.00
1.5 DLHS
1.0 DLHS
29,000 units
76,000 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:
$ 1,912,000
119,500 DLHS
Estimated total manufacturing overhead
Estimated total direct labor-hours
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
Expected Activity
Activities and Activity Measures
Supporting direct labor (direct labor-hours)
Batch setups (setups)
Product sustaining (number of products)
Overhead Cost
Xtreme Pathfinder
Total
$
76,000
693,100
539,000
640,000
39,900
43,500
119,500
290
200
490
1
1
2
Other
NA
NA
NA
Total manufacturing overhead cost
$ 1,912,000
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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