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	$	115.00		$	85.00
Direct materials per unit	$	63.90		$	51.00
Direct labor per unit	$	12.00		$	10.00
Direct labor-hours per unit		1.2	DLHs		1.0	DLHs
Estimated annual production and sales		28,000	units		75,000	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	$	2,063,400
Estimated total direct labor-hours		108,600	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)	$	673,320		33,600	75,000	108,600
Batch setups (setups)		520,000		280	240	520
Product sustaining (number of products)		790,000		1	1	2
Other		80,080		NA	NA	NA
Total manufacturing overhead cost	$	2,063,400