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 Xtreme Pathfinder $138.00 $ 90.00 Direct materials per unit $ 64.40 $ 51.00 Direct labor per unit $ 13.50 $ 9.00 Direct labor-hours per unit Estimated annual production and sales 1.5 DLHS 22,000 units 1.0 DLHS 73,000 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 $ 2,438,000 106,000 DLH 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 Supporting direct labor (direct labor-hours) Batch setups (setups) $ 646,600 969,000 Product sustaining (number of products) 780,000 1 Total 33,000 73,000 106,000 330 240 570 1 2 Other Total manufacturing overhead cost 42,400 $2,438,000 NA NA NA 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.