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

Xtreme Pathfinder

Selling price per unit $ 130.00 $ 91.00

Direct materials per unit $ 64.30 $ 50.00

Direct labor per unit $ 11.20 $ 8.00

Direct labor-hours per unit 1.4 DLHs 1.0 DLHs

Estimated annual production and sales 21,000 units 72,000 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 $ 2,230,800

Estimated total direct labor-hours 101,400 DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the companys 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):