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	$	126.00		$	91.00
Direct materials per unit	$	63.20		$	51.00
Direct labor per unit	$	11.70		$	9.00
Direct labor-hours per unit		1.3	DLHs		1.0	DLHs
Estimated annual production and sales		21,000	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	$2,250,600
Estimated total direct labor-hours	102,300 DLHs

Required:

.

1a. Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system.

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		Expected Activity
Activities and Activity Measures	Overhead Cost		Xtreme	Pathfinder	Total
Supporting direct labor (direct labor-hours)	$	767,250	27,300	75,000	102,300
Batch setups (setups)		722,000	210	170	380
Product sustaining (number of products)		670,000	1	1	2
Other		91,350	NA	NA	NA
Total manufacturing overhead cost	$	2,250,600

1b.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.)

1c. Prepare a quantitative comparison of the traditional and activity-based cost assignments.