Smoky Mountain Corporation makes two types of hiking boots-the Xtreme and the Pathfinder. Data concerning these two product lines appear below: Selling price per unit Direct materials per unit $ 65.30 Xtreme $ 121.00 Pathfinder $ 86.00 $ 52.00 $ 13.50 $ 9.00 1.5 DLHS 31,000 units Direct labor per unit Direct labor-hours per unit Estimated annual production and sales 1.0 DLHS 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 Estimated total direct labor-hours Required: $ 2,230,000 111,500 DLHS 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): Estimated Overhead Cost Expected Activity Xtreme 46,500 Pathfinder 65,000 Total 420 330 1 1 111,500 750 2 NA NA Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost $ 724,750 975,000 470,000 60,250 $ 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.