Wednesday, 1 April 2015

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

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

  Xtreme Pathfinder
  Selling price per unit $ 121.00   $ 86.00  
  Direct materials per unit $ 65.30   $ 52.00  
  Direct labor per unit $ 13.50   $ 9.00  
  Direct labor-hours per unit   1.5  DLHs   1.0  DLHs
  Estimated annual production and sales   31,000  units   65,000  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 $2,230,000           
  Estimated total direct labor-hours 111,500 DLHs  

  

Required:
1.
Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system.

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3.
Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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Explanation: