Smoky Mountain Corporation makes two types of hiking bootsthe Xtreme and the Pathfinder. Data concerning these two product lines appear below:

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:

a. Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system.

b. 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):

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

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

Xtreme Selling price per unit $ 115.00 Direct materials per unit $ 65.10 Direct labor per unit $10.00 Direct labor-hours per unit 1.0 DLHS Estimated annual production and sales 29,000 units Pathfinder $ 83.00 $ 50.00 $ 10.00 1.0 DLHS 71,000 units Estimated total manufacturing overhead Estimated total direct labor-hours $ 1,800,000 100,000 DLHS Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Estimated Overhead Cost $ 520,000 781,000 440,000 59,000 $ 1,800,000 Expected Activity Xtreme Pathfinder Total 29,000 71,000 100,000 400 310 710 1 1 2 NA NA NA