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 $ $121\mathrm{.}00$ $ $91\mathrm{.}00$

Direct materials per unit $ $63\mathrm{.}70$ $ $56\mathrm{.}00$

Direct labor per unit $ $8\mathrm{.}80$ $ $8\mathrm{.}00$

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

Estimated annual production and sales $26,000$ units $73,000$ 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 $ $2,133,600$

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

Required:

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

Estimated

Overhead Cost Expected Activity

Activities and Activity Measures Xtreme Pathfinder Total

Supporting direct labor $($direct labor$-$hours$)$ $ $629,92028,60073,000101,600$

Batch setups $($setups$)768,000260220480$

Product sustaining $($number of products$)710,000112$

Other $25,680$ NA NA NA

Total manufacturing overhead cost $ $2,133,600$

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

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