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

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:

Required:

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

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):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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

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:

Required:

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

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):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

The following is the ending balances of accounts at December 31, 2021, for the Vosburgh Electronics Corporation.

Additional information:

1. The common stock represents 1.0 million shares of no par stock authorized, 610,000 shares issued and outstanding.
2. The receivables from employees are due on June 30, 2022.
3. The notes receivable are due in installments of $61,000, payable on each September 30. Interest is payable annually.
4. Short-term investments consist of securities that the company plans to sell in 2022 and $61,000 in treasury bills purchased on December 15 of the current year that mature on February 15, 2022. Long-term investments consist of securities that the company does not plan to sell in the next year.
5. Deferred revenue represents payments from customer for extended service contracts. Eighty percent of these contracts expire in 2022, the remainder in 2023.
6. Notes payable consists of two notes, one for $111,000 due on January 15, 2023, and another for $211,000 due on June 30, 2024.

Required:
Prepare a classified balance sheet for Vosburgh at December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit $ 138.00 $ 90.00 Direct materials per unit $ 64.40 $ 51.00 Direct labor per unit $ 13.50 $ 9.00 Direct labor-hours per unit 1.5 DLHs 1.0 DLHs Estimated annual production and sales 22,000 units 73,000 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 $ 2,438,000 Estimated total direct labor-hours 106,000 DLHs Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. 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 Overhead Cost Expected Activity Activities and Activity Measures Xtreme Pathfinder Total Supporting direct labor (direct labor-hours) $ 646,600 33,000 73,000 106,000 Batch setups (setups) 969,000 330 240 570 Product sustaining (number of products) 780,000 1 1 2 Other 42,400 NA NA NA Total manufacturing overhead cost $ 2,438,000 Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

(ONLY DO PART 3)

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

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:

Required:

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

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):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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

Zeta Department Store has developed the following information in order to develop a TDABC model for its accounts receivable department:

The time to process payments of customer invoices depends on whether the customer pays the bill manually or electronically, as shown above. The time to maintain each customer file is the same for all customers. The annual cost of the accounts receivable department is $500,000, and the associated practical capacity of accounts receivable labor is 10,000 hours. The accounts receivable department has six employees.

(a) What is the capacity cost rate for the accounts receivable department?

(b) Zeta’s division 1 has 1,000 small- to medium-sized customers who annually generate a total of $10 million in sales, resulting in 4,000 invoices. These customers pay all their invoices manually. What is the annual activity-based cost associated with division 1’s customers?

(c) Zeta’s division 2 has 200 large customers who annually generate a total of $10 million in sales, resulting in 400 invoices. These customers pay all of their invoices electronically. What is the annual activity-based cost associated with division 2’s customers?

(d) Suppose half of Zeta’s division 1 customers change their method of payment to electronic next year. How many hours of accounts receivable labor will it require for 1,000 customers, 2,000 manual invoices, and 2,000 electronic invoices? How much will division 1 be charged for the accounts receivable function? Will Zeta’s costs decrease because of the shift to 50% electronic invoicing in division 1?

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

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:

Required:

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

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):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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

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:

Required:

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

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):

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Sunrise, Inc., has no debt outstanding and a total market value of $422,400. Earnings before interest and taxes, EBIT, are projected to be $55,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 14 percent higher. If there is a recession, then EBIT will be 20 percent lower. The company is considering a $205,000 debt issue with an interest rate of 6 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,800 shares outstanding. Ignore taxes for questions a and b. Assume the company has a market-to-book ratio of 1.0 and the stock price remains constant.

a-1. Calculate return on equity (ROE) under each of the three economic scenarios (Normal, recession, expansion) before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

a-2. Calculate the percentage changes in ROE when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) before any debt is issued. (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b-1. Assume the firm goes through with the proposed recapitalization. Calculate the return on equity (ROE) under each of the three economic scenarios (Normal, recession, expansion). (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b-2. Assume the firm goes through with the proposed recapitalization. Calculate the percentage changes in ROE when the economy expands, or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)