ments differ PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins (L07-1, L07-3, L07-4, Smoky Mountain Corporation makes two types of hiking bootsXtreme and the Pathfinder. Data concerning these two product lines appear below: L07-5) Xtreme Pathfinder 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 $99.00 $53.00 $12.00 1.0 DLHS 80,000 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: 16.5 0 Estimated total manufacturing overhead Estimated total direct labor-hours $1,980,000 120,000 DLHS 33 7,500 Required: mufacturing 1. Using Exhibit 7-13 as a guide, compute the product margins for the Xtreme and the Path- Locatie finder 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 activ- ity cost pools (the Other cost pool includes organization-sustaining costs and idle capacity costs): otal 88,000 504,000 508,000 500.00 Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Estimated Expected Activity Overhead Cost Xtreme Pathfinder Total 300 $ 783,600 40,000 80,000 120,000 495,000 200 320100 0300 602,400 1 1 2 99,000 NA NA $1,980,000 NA Witahidi . x The The AR hol Using Exhibit 7-11 as a guide, compute the product margins for the Xtreme and the Path- finder products under the activity-based costing system 3. Using Exhibit 7-14 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assign- ments differ