PROBLEM 8-16 Comparing Traditional and Activity-Based Product Margins [LO1, L03, L04, L05] Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below: Xtreme Pathfinder Selling price per unit.. $140.00 $99.00 Direct materials per unit $72.00 $53.00 Direct labor per unit.... $24.00 $12.00 Direct labor-hours per unit..... 2.0 DLHS 1.0 DLHS Estimated annual production. .... 20,000 units 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 8-12 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 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).. $ 783,600 Estimated Overhead Cost Expected Activity Xtreme Pathfinder Total 40,000 80,000 120,000 Batch setups (setups) 495,000 200 100 300 Product sustaining (number of products).. 602,400 1 1 2 Other ..... 99,000 NA NA Total manufacturing overhead cost $1,980,000 Using Exhibit 8-10 as a guide, compute the product margins for the Xtreme and the Path- finder products under the activity-based costing system. 3. Using Exhibit 8-13 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost as- signments differ. Required: 1. Using Exhibit 8-12 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 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).. $ 783,600 Estimated Overhead Cost Expected Activity Xtreme Pathfinder Total 40,000 80,000 120,000 Batch setups (setups) 495,000 200 100 300 Product sustaining (number of products).. 602,400 1 1 2 Other ..... 99,000 NA NA Total manufacturing overhead cost $1,980,000 Using Exhibit 8-10 as a guide, compute the product margins for the Xtreme and the Path- finder products under the activity-based costing system. 3. Using Exhibit 8-13 as a guide, prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost as- signments differ.