Smoky MountainCorporation makes two types of hiking boots—the Xtreme and thePathfinder. Data concerning these two product lines appearbelow:
| Xtreme | Pathfinder |
| Selling price per unit | $ | 120.00 | | $ | 87.00 | |
| Direct materialsper unit | $ | 63.30 | | $ | 52.00 | |
| Direct labor perunit | $ | 17.00 | | $ | 10.00 | |
| Directlabor-hours per unit | | 1.7 | DLHs | | 1.0 | DLHs |
| Estimated annualproduction and sales | | 22,000 | units | | 76,000 | units |
|
The company has atraditional costing system in which manufacturing overhead isapplied to units based on direct labor-hours. Data concerningmanufacturing overhead and direct labor-hours for the upcoming yearappear below:
| Estimated
Overhead Cost | Expected Activity |
| Activities andActivity Measures | Xtreme | Pathfinder | Total |
| Supporting direct labor (direct labor-hours) | $ | 703,080 | | 37,400 | 76,000 | 113,400 |
| Batch setups(setups) | | 480,000 | | 220 | 180 | 400 |
| Productsustaining (number of products) | | 700,000 | | 1 | 1 | 2 |
| Other | | 44,720 | | NA | NA | NA |
| Totalmanufacturing overhead cost | $ | 1,927,800 | | | | |
|
Compute the productmargins for the Xtreme and the Pathfinder products under theactivity-based costing system.
3. Prepare aquantitative comparison of the traditional and activity-based costassignments.
| | | |
| Estimated totalmanufacturing overhead | $ | 1,927,800 | |
| Estimated totaldirect labor-hours | | 113,400 | DLHs |
