Rocky Mountain Corporation makes two types of hiking boots Xactive and the Pathbreaker. Data concerning these two product lines appear below:

----------------------------------------------------Xactive -- Pathbreaker Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . $127.00 $89.00 Direct materials per unit . . . . . . . . . . . . . . . . . . . . $64.80 $51.00 Direct labor per unit . . . . . . . . . . . . . . . . . . . . . . . $18.20 $13.00 Direct labor-hours per unit . . . . . . . . . . . . . . . . . . 1.4 DLHs 1.0 DLHs Estimated annual production and sales . . . . . . . . 25,000 units 75,000 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 . . . . . . . . . . $2,200,000 Estimated total direct labor-hours . . . . . . . . . . . . . . . . 110,000 DLHs

-----

Required: 1.compute the product margins for the Xactive and the Pathbreaker products under the companys 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): Expected Activity Activities and Activity Measures Estimated Overhead Cost Xactive Pathbreaker Total Supporting direct labor (direct labor-hours) . . . $ 797,500 35,000 75,000 110,000 Batch setups (setups) . . . . . . . . . . . . . . . . . . . $680,000 250 150 400 Product sustaining (number of products) . . . . . $650,000 1 1 2 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $72,500 -NA -NA -NA Total manufacturing overhead cost . . . . . . . . . $2,200,000

compute the product margins for the Xactive and the Pathbreaker products under the activity-based costing system.

------

3. prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assignments differ.