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 Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Xtreme Pathfinder $ 120.00 $ 90.00 $ 53.00 $ 9.00 $ 64.10 $13.50 1.5 DLHS 30,000 units 1.0 DLHS 70,000 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 $ 2,300,000 115,000 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 Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Estimated Overhead Cost $977,500 Expected Activity Xtreme Pathfinder 45,000 70,000 Total 115,000 612,000 300 210 510 700,000 1 1 10,500 NA NA NA $ 2,300,000 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.