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

XtremePathfinderSelling price per unit$115.00$85.00Direct materials per unit$65.40$53.00Direct labor per unit$16.00$10.00Direct labor-hours per unit1.6DLHs1.0DLHsEstimated annual production and sales32,000units60,000units

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$1,779,200Estimated total direct labor-hours111,200DLHs

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):

Estimated

Overhead CostExpected ActivityActivities and Activity MeasuresXtremePathfinderTotalSupporting direct labor (direct labor-hours)$556,00051,20060,000111,200Batch setups (setups)770,000430340770Product sustaining (number of products)400,000112Other53,200NANANATotal manufacturing overhead cost$1,779,200

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