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 $ $120\mathrm{.}00$ $ $87\mathrm{.}00$

Direct materials per unit $ $65\mathrm{.}20$ $ $51\mathrm{.}00$

Direct labor per unit $ $11\mathrm{.}20$ $ $8\mathrm{.}00$

Direct labor$-$hours per unit $1\mathrm{.}4$ DLHs $1\mathrm{.}0$ DLHs

Estimated annual production and sales $30,000$ units $65,000$ 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 $ $2,033,000$

Estimated total direct labor$-$hours $107,000$ 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$)$:

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

Xtreme Pathfinder Total

Supporting direct labor $($direct labor$-$hours$)$ $ $631,30042,00065,000107,000$

Batch setups $($setups$)876,000410320730$

Product sustaining $($number of products$)460,000112$

Other $65,700$ NA NA NA

Total manufacturing overhead cost $ $2,033,000$

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.