Smoky Mountain Corporation makes two types of hiking boots

| October 3, 2018

Smoky Mountain Corporation makes two types of hiking boots”Xtreme and the Pathfinder. Data concerning these two product lines appear below:XactivePathbreakerSelling price per unit$127.00$89.00Direct materials per unit$64.80$51.00Direct labor per unit$18.20$13.00Direct labor-hours per unit1.4DLHs1.0DLHsEstimated annual production and sales25,000units75,000unitsThe 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 $2,200,000Estimated total direct labor-hours 110,000 DLHsRequirement 1:(a)Calculate the predetermined overhead rate. (Round your answer to 2 decimal places. Omit the “$” sign in your response.)Predetermined overhead rate $(b)Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. (Negative amount should be indicated by a minus sign. Round your predetermined overhead rate to 2 decimal places. Round your answers to the nearest dollar amount. Omit the “$” sign in your response.)XtremeProduct margin – ?PathfinderProduct margin – ?Requirement 2: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):EstimatedExpected ActivityActivities and Activity MeasuresOverhead CostXactivePathbreakerTotalSupporting direct labor (direct labor-hours)$797,50035,00075,000110,000Batch setups (setups)680,000250150400Product sustaining (number of products)650,000112Other72,500NANANATotal manufacturing overhead cost$2,200,000Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative amount should be indicated by a minus sign. Do not round your intermediate calculations. Omit the “$” sign in your response.)XtremeProduct margin – ?PathfinderProduct margin -?Requirement 3: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 “$” & “%” signs in your response.)XactivePathbreakerTotalAmount% ofTotal AmountAmount% ofTotal AmountAmountTraditional Cost System(Click to select)Supporting direct laborSelling and administrativeOtherDirect materialsBatch setupsProduct sustaining$%$%$(Click to select)Direct laborBatch setupsOtherProduct sustainingSelling and administrativeSupporting direct labor%%(Click to select)OtherManufacturing overheadSelling and administrativeProduct sustainingBatch setupsSupporting direct labor%%Total cost assigned to products$$$Activity-Based Costing SystemDirect costs:(Click to select)Batch setupsSelling and administrativeSupporting direct laborProduct sustainingDirect materialsManufacturing overhead$%$%$(Click to select)Supporting direct laborBatch setupsSelling and administrativeManufacturing overheadProduct sustainingDirect laborOther%%Indirect costs:(Click to select)Direct laborOtherSelling and administrativeManufacturing overheadDirect materialsSupporting direct labor%%(Click to select)Manufacturing overheadOtherSelling and administrativeBatch setupsDirect laborDirect materials%%(Click to select)OtherSelling and administrativeDirect laborManufacturing overheadProduct sustainingDirect materials%%Total cost assigned to products$$$Costs not assigned to products:(Click to select)Direct laborDirect materialsSupporting direct laborBatch setupsOtherProduct sustainingTotal cost$

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