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 $ $121\mathrm{.}00$ $ $88\mathrm{.}00$

Direct materials per unit $ $64\mathrm{.}70$ $ $54\mathrm{.}00$

Direct labor per unit $ $10\mathrm{.}80$ $ $9\mathrm{.}00$

Direct labor$-$hours per unit $1\mathrm{.}2$ DLHs $1\mathrm{.}0$ DLHs

Estimated annual production and sales $25,000$ units $71,000$ 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 $ $2,020,000$

Estimated total direct labor$-$hours $101,000$ DLHs

Required:

Compute the product margins for the Xtreme and the Pathfinder products 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$)$:

Activities and $($Activity Measures$)$ Estimated Overhead Cost Expected Activity

Xtreme Pathfinder Total

Supporting direct labor $($direct labor$-$hours$)$ $ $606,00030,00071,000101,000$

Batch setups $($setups$)693,000360270630$

Product sustaining $($number of products$)700,000112$

Other $21,000$ NA NA NA

Total manufacturing overhead cost $ $2,020,000$

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

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