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

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

Xtreme

Pathfinder

Selling price per unit

$

138.00

$

90.00

Direct materials per unit

$

64.40

$

51.00

Direct labor per unit

$

13.50

$

9.00

Direct labor-hours per unit

1.5

DLHs

1.0

DLHs

Estimated annual production and sales

22,000

units

73,000

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

$

2,438,000

Estimated total direct labor-hours

106,000

DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system. (Do not round your intermediate calculations.)

Xtreme

Pathfinder

Total

Product margin

$0

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

Activity

Activities and Activity Measures

Overhead Cost

Xtreme

Pathfinder

Total

Supporting direct labor (direct labor-hours)

$

646,600

33,000

73,000

106,000

Batch setups (setups)

969,000

330

240

570

Product sustaining (number of products)

780,000

1

1

2

Other

42,400

NA

NA

NA

Total manufacturing overhead cost

$

2,438,000

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative product margins should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places.)

Xtreme

Pathfinder

Total

Product margin

$0

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