3.Compare the product margins generated under the traditional and activitybased cost assignments? Explain why the traditional and activity-based cost assignments differ? Discuss which of the products is overcosted/undercosted under traditional costing system.

KDDM Manufacturing Corporation makes two types of Productsthe Standard and the Deluxe. The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours (DLHS). Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead $2,250,000 Estimated total direct labor-hours 120,000 DLHs Data concerning these two product lines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production &sales Standard $150 $75 $25 1.0 DLHs 20,000 units Deluxe $100 $53.00 $15.00 1.25 DLHs 80,000 units Required 1: Compute and prepare the product margins for the Standard and the Deluxe products under the company's traditional costing system. Assume the company is now considering replacing its traditional costing system with an activity-based costing (ABC) 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): Expected Activity Estimated Overhead Cost Standard Deluxe Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other $ 840,000 540,000 40,000 200 80,000 100 650,000 220,000 1 NA 1 NA (NA: Not Applicable) Required 2: Compute and prepare the product margins for Standard product and Deluxe product under the activity-based costing system