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

Question

4. Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder Data concerning these two product ines appear below 40 Direct materials per unit 63.20 s 11,70 s 5.00 5 9.00 Direet labor Eatinated annual produetion and sales ts per unit 3 DEH 0 DLH 21,000 unts 75,000 units Print erene The company has tradtional costing ystem in wnich manudecting oed i pos to unts based on diret concerning manufacturing overhead and direct labor-hours for the upcoming year appear below 2,250,600 102,300 DL 1 Compute the 2. e product margins for the Xtreme and the Pathfinder products under the company's traditional costing system ing overhead to the following four activity cost pools (the Other cost pool includes organization-sustaining costs and idie The company is considering replacing its traditional costing system with an activity-based costing system that would assign its capacity costs) overhead 767,250 27,300 75,000 102,300 supporting direct iabor (direct labor-hours) Batch setups (s 210 170 total nanufacturing overhead cost $ 2,250,600

Explanation / Answer

4) 1. Product margins on traditional costing method: Xtreme Pathfinder Selling price per unit 124 91 DM per unit 63.2 51 DL per unit 11.7 9 manuf overhead 28.6 22 (22/DLH) Total cost 103.5 82 Product margin 20.5 9 % of margin 16.53 9.89 2. Product margins on ABC costing method: Overhead allocation : supporting DL 204750 562500 batch setups 399000 323000 product sustain 335000 335000 other 0 0 Total allocation 938750 1220500 Production 21000 75000 Per unit 44.70 16.27 Product margin: Xtreme Pathfinder Selling price per unit 124 91 DM per unit 63.2 51 DL per unit 11.7 9 manuf overhead 44.7 16.27 Total cost 119.6 76.27 Product margin 4.4 14.73 % of margin 3.55 16.19 3) Xtreme Pathfinder Total Amount %of T Amount Amount %of T Amount TraditionalCosting System: DM per unit 63.2 0.610628019 51 0.62195122 114.2 DL per unit 11.7 0.113043478 9 0.109756098 20.7 M O/H 28.6 0.276328502 22 0.268292683 50.6 Total Cost per unit 103.5 82 185.5 ABC costing system: Direct cost: DM per unit 63.2 0.53 51 0.67 114.20 DL per unit 11.7 0.10 9 0.12 20.70 Indirect cost: supporting DL per unit 9.75 0.08 7.5 0.10 17.25 batch setups per unit 19 0.16 4.31 0.06 23.31 product sustain Per unit 15.95 0.13 4.47 0.06 20.42 Total cost allocated per unit 119.60 76.27 195.88

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