Selling price per unit

Direct materials per unit

Direct labor per unit

Direct labor$-$hours per unit

Estimated annual production and sales

Xtreme

$ $138\mathrm{.}00$

$ $64\mathrm{.}40$

$ $13\mathrm{.}50$

$1\mathrm{.}5$ DLHS

$22,000$ units

Pathfinder

$ $90\mathrm{.}00$

$ $51\mathrm{.}00$

$ $9\mathrm{.}00$

$1\mathrm{.}0$ DLH

$73,000$ units

The company has a traditional costing system that applies manufacturing overhead 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

$ $2,438,000$

$106,000$ DLHS

Required:

$1.$ Compute the product margins for Xtreme and Pathfinder 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

$ $646,600$

$969,000$

$780,000$

$42\mathrm{.}400$

$ $2,438,000$

Expected Activity

Xtreme

Pathfinder

Total

$33,000$

$73,000$

$106,000$

$330$

$240$

$570$

$1$

$1$

$2$

NA

NA

NA

Compute the product margins for Xtreme and Pathfinder under the activity$-$based costing system.

$3.$ Prepare a quantitative comparison of the traditional and activity$-$based cost assignments.