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 $ 120.00 $ 65.20 $ 11.20 1.4 DLHS 30,000 units Pathfinder $ 87.00 $ 51.00 $ 8.00 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 $ 2,033,000 107,000 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): Estimated Overhead Cost $ 631,300 876,000 460,000 65,700 $ 2,033,000 Activities and Activity Measures Supporting direct labor (direct labor-hours) Batch setups (setups) Product sustaining (number of products) Other Total manufacturing overhead cost Expected Activity Xtreme Pathfinder Total 42,000 65,000107,000 410 730 1 1 NA NA 320 2 NA