Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below:
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Xtreme
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Pathfinder
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Selling price per unit
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$ 140.00
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$ 99.00
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|
Direct materials per unit
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$ 72.00
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$ 53.00
|
|
Direct labor per unit
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$24.00
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$ 12.00
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Direct labor-hours per unit
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2.0 DLHS
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1.0 DHLS
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Estimated annual production and sales
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20,000 units
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80,000 units
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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 $2,033,000
Estimated total direct labor-hours 107,000 DLHs
Required:
1. Using Exhibit 6-13 as a guide Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system.
1. 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)