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

XtremePathfinderSelling price per unit$132.00$94.00Direct materials per unit$64.60$53.00Direct labor per unit$9.60$8.00Direct labor-hours per unit1.2DLHs1.0DLHsEstimated annual production and sales24,000units70,000units

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$2,470,000Estimated total direct labor-hours98,800DLHs

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):

.

EstimatedActivityActivities and Activity MeasuresOverhead CostXtremePathfinderTotalSupporting direct labor (direct labor-hours)$642,20028,80070,00098,800Batch setups (setups)915,000350260610Product sustaining (number of products)840,000112Other72,800NANANATotal manufacturing overhead cost$2,470,000

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