Search the web... D Ch, 6 Homework eztonteducation.comhen.tpx Smoky Mountain Cor

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Search the web... D Ch, 6 Homework eztonteducation.comhen.tpx Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder Data conceming these two product lines appear below Selling price per unit Direct materials per uni Direct labor per unit Direct labor-hours per unit Estimated annual production and sales S 116.00 S 64.00 S 12.00 $ 80 00 S 52.00 5 8.00 5 DLHs 29,000 unis 10 DLHs 76,000 units The company has a tradtional costing system in which manufacturing overhead is applied to units based on direct labor-hours Data conceming ma upcoming year appear below $1,912.000 Estimated total manufacturing overhead 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 (Do not round your i Xtreme Pathfinder Total Product margin 2 The company is considering replacing ts traotional costing system with an activity-based costing system that would assign its manufacturnng ow Other cost pool includes organization-sustaning costs and idie capacity costs) Type here to search 28

Explanation / Answer

Answer 1 Computation of product Margin using traditional costing system Xtreme Pathfinder Total Units sold 29000 76000 Sales $3,364,000.00 $6,080,000.00 Less : Costs Direct Material cost $1,856,000.00 $3,952,000.00 Direct Labour cost $348,000.00 $608,000.00 Manufacturing Overhead $696,000.00 $1,216,000.00 Total Cost $2,900,000.00 $5,776,000.00 Total Product Margin $464,000.00 $304,000.00 $768,000.00 Predetermined manufacturing overhead application rate = Estimated total manufacturing overheads / Estimated total direct labour hours Predetermined manufacturing overhead application rate = $1912000 / 119500 hours = $16 per direct labour hour Answer 2 Computation of product Margin using traditional costing system Xtreme Pathfinder Total Units sold 29000 76000 Sales $3,364,000.00 $6,080,000.00 Less : Costs Direct Material cost $1,856,000.00 $3,952,000.00 Direct Labour cost $348,000.00 $608,000.00 Manufacturing Overheads - Supporting direct labour $252,300.00 $440,800.00 - Batch setup $319,000.00 $220,000.00 - Product sustaining $320,000.00 $320,000.00 Total Cost $3,095,300.00 $5,540,800.00 Total Product Margin $268,700.00 $539,200.00 $807,900.00 Calculation of activity rates Supporting direct labour = Estimated overhead cost / Estimated total direct labour hours = $693100 / 119500 hours = $5.80 per direct labour hour Batch setup = Estimated overhead cost / No.of setups = $539000 / 490 setups = $1100 per setup Product sustaining = $640000 / 2 = $320000 per product Answer 3 Quantitative Comparison Xtreme Pathfinder Total Amount % of Total Amount Amount % of Total Amount Traditional Cost system Direct Material cost $1,856,000.00 21.39% $3,952,000.00 45.55% $5,808,000.00 Direct Labour cost $348,000.00 4.01% $608,000.00 7.01% $956,000.00 Manufacturing Overhead $696,000.00 8.02% $1,216,000.00 14.02% $1,912,000.00 Total Cost assigned to products $2,900,000.00 $5,776,000.00 $8,676,000.00 Xtreme Pathfinder Total Amount % of Total Amount Amount % of Total Amount Activity Based Cost system Direct Cost Direct Material cost $1,856,000.00 21.39% $3,952,000.00 45.55% $5,808,000.00 Direct Labour cost $348,000.00 4.01% $608,000.00 7.01% $956,000.00 Indirect Cost $0.00 - Supporting direct labour $252,300.00 2.91% $440,800.00 5.08% $693,100.00 - Batch setup $319,000.00 3.68% $220,000.00 2.54% $539,000.00 - Product sustaining $320,000.00 3.69% $320,000.00 3.69% $640,000.00 Total Cost assigned to products $3,095,300.00 $5,540,800.00 $8,636,100.00 Cost not assigned to products Other overheads $39,900.00 Total Cost $8,676,000.00

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