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

Xtreme

Pathfinder

Selling price per unit

$

141.00

$

91.00

Direct materials per unit

$

64.50

$

52.00

Direct labor per unit

$

17.00

$

10.00

Direct labor-hours per unit

1.7

DLHs

1.0

DLHs

Estimated annual production and sales

23,000

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	$	2,714,400
Estimated total direct labor-hours		113,100	DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the companys 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)	$	791,700		39,100	74,000	113,100
Batch setups (setups)		1,062,000		340	250	590
Product sustaining (number of products)		790,000		1	1	2
Other		70,700		NA	NA	NA
Total manufacturing overhead cost	$	2,714,400
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.