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

Question

Smoky Mountain Corporation makes two types of hiking boots-Xtreme 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 $124.00 $ 63.40 $14.40 $ 88.00 53.00 $ 8.00 1.8 DLHs 23,000 units 1.0 DLHs 70,000 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 Estimated total direct labor-hours S2,005,200 111,400 DLHs Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. Total XtremePathfinder Product margin

Explanation / Answer

Required information is as calculated below:

Working:

1 Product margin under traditional system is Xtreme Pathfinder Total A No. of units 23,000 70,000 93,000 B Sale price per unit 124 88 C=A*B Sale Value 2,852,000 6,160,000 9,012,000 D Direct Material 1,458,200 3,710,000 5,168,200 E Direct Labor 331,200 560,000 891,200 F=D+E Total Direct Costs 1,789,400 4,270,000 6,059,400 G Manufacturing Overhead 745,200 1,260,000 2,005,200 H =F+G Total Product Cost 2,534,600 5,530,000 8,064,600 I=C-H Product Margin 317,400 630,000 947,400

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