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

	Xtreme			Pathfinder
Selling price per unit	$	120.00		$	92.00
Direct materials per unit	$	63.50		$	54.00
Direct labor per unit	$	13.50		$	9.00
Direct labor-hours per unit		1.5	DLHs		1.0	DLHs
Estimated annual production and sales		24,000	units		71,000	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	$	2,033,000
Estimated total direct labor-hours		107,000	DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the companys 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
Activities and Activity Measures				Xtreme	Pathfinder	Total
Supporting direct labor (direct labor-hours)	$	663,400		36,000	71,000	107,000
Batch setups (setups)		572,000		240	200	440
Product sustaining (number of products)		750,000		1	1	2
Other		47,600		NA	NA	NA
Total manufacturing overhead cost	$	2,033,000

************BOLD ANSWERS ARE INCORRECT EVERYTHING ELSE IS CORRECT**************

Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

	Xtreme	Pathfinder	Total
Product margin	$186,000	$710,000	$896,000

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Round your intermediate calculations to 2 decimal places.)

	Xtreme	Pathfinder	Total
Product margin	$(64,000)	$960,000	$896,000

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place.)

	Xtreme			Pathfinder			Total
		% of			% of
	Amount	Total Amount		Amount	Total Amount		Amount
Traditional Cost System
Direct materials	$1,524,000	57.0	%	$3,834,000	66.0	%	$5,358,000
Direct labor	486,000	18.0	%	639,000	11.0	%	1,125,000
Manufacturing overhead	684,000	25.0	%	1,349,000	23.0	%	2,033,000
Total cost assigned to products	$2,694,000			$5,822,000			$8,516,000
	Xtreme			Pathfinder			Total
		% of			% of
	Amount	Total Amount		Amount	Total Amount		Amount
Activity-Based Costing System
Direct costs:
Direct materials	$1,524,000	52.0	%	$3,834,000	69.0	%	$5,358,000
Direct labor	486,000	17.0	%	639,000	11.0	%	1,125,000
Indirect costs:
Supporting direct labor	223,200	8.0	%	440,200	8.0	%	663,400
Batch setups	312,000	11.0	%	260,000	5.0	%	572,000
Product sustaining	375,000	13.0	%	375,000	7.0	%	750,000
Total cost assigned to products	$2,920,200			$5,548,200			$8,468,400
Costs not assigned to products:
Other							47,600
Total cost							$8,516,000