Problem 7-17 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Direct labor per unit Selling price per unit Direct materials per unit Direct labor-hours per unit $ 120.00 $ 87.00 $ 63.30 $ 52.00 $ 17.00 Estimated annual production and sales 1.7 DLHS 22,000 units $ 10.00 1.0 DLHS 76,000 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 Estimated total direct labor-hours $ 1,927,800 113,400 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): Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Estimated Overhead Cost Expected Activity Xtreme Pathfinder $ 703,080 37,400 76,000 Total 113,400 480,000 220 180 400 700,000 1 1 2 44,720 NA NA $ 1,927,800 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.