PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins L07-1, LO7-3, L07-4. 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 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 20 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: Estimated total manufacturing overhead Estimated total direct labor-hours $1,980,000 120.000 DLHS Required: 1. Using Exhibit 7-13 as a guide, compute the product margins for the Xtreme and the Path- 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): Activities and (Activity Measures) Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Expected Activity Estimated Overhead Cost Xtreme Pathfinder Total $ 783,600 40.000 80.000 120.000 495,000 200 100 300 602,400 1 1 2 99.000 NA NA NA $1,980,000 . 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 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