Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfi

Question

Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below: 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: 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): 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.)

Explanation / Answer

Hi,

Please find the comparision below:

Thanks,

Aman

Traditional Cost System






Extreme
Pathfinder

Amount %
Amount % Total Amount Direct Material 1121000 51.85
2592000 30.46 3713000 Direct Labor 380000 17.57
2160000 25.38 2540000 Manufacturing Overhead 661200 30.58
3758400 44.16 4419600 Total Cost Assigned to Products 2162200

8510400
10672600






Activity Based Costing





Direct Costs





Direct Material 1121000 55.14
2592000 38.54 3713000 Direct Labor 380000 18.69
2160000 32.12 2540000 Indirect Costs





Supporting Direct Labor 221540 10.90
1259280 18.72 1480820 Batch Setups 170500 8.39
294500 4.38 465000 Product Sustaining 139925 6.88
419775 6.24 559700 Total Cost Assigned to Products 2032965

6725555
8758520






Cost Not Assigned to Products





Other




1914080 Total Cost




10672600

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