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 $ $123\mathrm{.}00$ $ $86\mathrm{.}00$

Direct materials per unit $ $63\mathrm{.}80$ $ $50\mathrm{.}00$

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 $27,000$ units $74,000$ 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 $ $2,340,800$

Estimated total direct labor$-$hours $106,400$ 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$)$ $ $691,60032,40074,000106,400$

Batch setups $($setups$)900,000270230500$

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

Other $49,200$ NA NA NA

Total manufacturing overhead cost $ $2,340,800$

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.