based cost assignments Explain why the trial 0 3 .106-4 he Path PROBLEM 6-17 Comparing fra 17 Comparing Traditional and Activity-Based Product Margins (LOG-1, LO y Mountain Corporation makes two types of hiking boots Xtreme and the concerning these two product lines appear below Xtreme Selling price per unit ....... Direct materials per unit..... Direct labor per unit ...... Direct labor-hours per unit.... Estimated annual production and sales .. $140.00 $72.00 $24.00 2.0 DLHS 20,000 units Partidade $99.00 $53.00 $12.00 100 80,000 erhead is applied direct labore The company has a traditional costing system in which manufacturing overhead units based on direct labor-hours. Data concerning manufacturing overhead and direct for the upcoming year appear below: ...... $1,980,000 Estimated total manufacturing overhead .... Estimated total direct labor-hours ... 120,000 DLHS Required: 1. Using Exhibit 6-13 as a guide, compute the product margins for the Xtreme and the finder products under the company's traditional costing system. The company is considering replacing its traditional costing system with an act costing system that would assign its manufacturing overhead to the following four a cost pools (the Other cost pool includes organization-sustaining costs and idle capacity Estimated Expected Activity Activities (and Activity Measures) Overhead Cost Xtreme Pathfinder Supporting direct labor (direct labor-hours).... $ 783,600 40.000 80.000 Batch setups (setups) ................... 495,000 200 100 Product sustaining (number of products)...... 602,400 1 Other .................................... 99,000 NA NA Total manufacturing overhead cost........... $1,980,000 Activity-Based Costing: A Tool to Aid Decision Making Using Exhibit 0-11 as a guide, compute the product margins for the Xtreme and the Path- finder products under the activity-based costing system. Using Exhibit 6-14 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assign- 2 ments differ