Posted: December 21st, 2015

Compute 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.)

 

 

Xactive Pathbreaker
Selling price per unit $ 127.00 $ 89.00
Direct materials per unit $ 64.80 $ 51.00
Direct labor per unit $ 18.20 $ 13.00
Direct labor-hours per unit 1.4 DLHs 1.0 DLHs
Estimated annual production and sales 25,000 units 75,000 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 $2,200,000

Estimated total direct labor-hours 110,000 DLHs

Requirement 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.)

Xtreme

Product margin – ?

 

Pathfinder

Product 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):

 

 

 

Estimated Expected Activity
Activities and Activity Measures Overhead Cost Xactive Pathbreaker Total
Supporting direct labor (direct labor-hours) $ 797,500 35,000 75,000 110,000
Batch setups (setups) 680,000 250 150 400
Product sustaining (number of products) 650,000 1 1 2
Other 72,500 NA NA NA


Total manufacturing overhead cost $ 2,200,000





 

 

 

Compute 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.)

Xtreme

Product margin – ?

Pathfinder

Product 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.)

 

Xactive Pathbreaker Total
Amount % of

Total Amount

Amount % of

Total Amount

Amount
Traditional 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 System
Direct 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 sustaining

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