Smoky Mountain Corporation makes two types of hiking boots$-$Xtreme and Pathfinder. Data concerning these two product lines appear below:

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

$$2,133,600$

Estimated total direct labor$-$hours $101,600$ DLHs

Required:

Compute the product margins for Xtreme and Pathfinder under the company's traditional costing system.

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$)$:

$\backslash$table$[[,$Estimated,Expected Activity$],[$Activities and $($Activity Measures$),$Overhead Cost,Xtreme,Pathfinder,Total$],[$Supporting direct labor $($direct labor$-$hours$),$$$629,920,28,600,73,000,101,600],[$Batch setups $($setups$),768,000,260,220,480],[$Product sustaining $($number of products$),710,000,1,1,2],[$Other$,25,680,$NA$,$NA$,$NA$],[$Total manufacturing overhead cost,$$2,133,600,,,]]$

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.

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