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 $ $121\mathrm{.}00$ $ $86\mathrm{.}00$

Direct materials per unit $ $65\mathrm{.}30$ $ $52\mathrm{.}00$

Direct labor per unit $ $13\mathrm{.}50$ $ $9\mathrm{.}00$

Direct labor$-$hours per unit $1\mathrm{.}5$ DLHs $1\mathrm{.}0$ DLHs

Estimated annual production and sales $31,000$ 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 $ $2,230,000$

Estimated total direct labor$-$hours $111,500$ 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$)$ $ $724,75046,50065,000111,500$

Batch setups $($setups$)975,000420330750$

Product sustaining $($number of products$)470,000112$

Other $60,250$ NA NA NA

Total manufacturing overhead cost $ $2,230,000$

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.