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

$

121.00

$

91.00

Direct materials per unit

$

63.70

$

56.00

Direct labor per unit

$

8.80

$

8.00

Direct labor-hours per unit

1.1

DLHs

1.0

DLHs

Estimated annual production and sales

26,000

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$2,133,600

Estimated total direct labor-hours101,600 DLHs

Required:

1.

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

	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

Expected Activity

Activities and Activity Measures

Overhead Cost

Xtreme

Pathfinder

Total

Supporting direct labor (direct labor-hours)

$

629,920

28,600

73,000

101,600

Batch setups (setups)

768,000

260

220

480

Product sustaining (number of products)

710,000

1

1

2

Other

25,680

NA

NA

NA

Total manufacturing overhead cost

$

2,133,600

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

	Xtreme	Pathfinder	Total
Product margin	?	?	$0

3.

Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

	Xtreme		Pathfinder		Total
		% of		% of
	Amount	Total Amount	Amount	Total Amount	Amount
Traditional Cost System
Direct materials	$1,656,200	?	$4,088,000	?	$5,744,200
Direct labor	228,800	?	584,000	?	812,800
Manufacturing overhead	?	?	?	?	?
Total cost assigned to products	$1,885,000		$4,672,000		6,557,000

	Xtreme		Pathfinder		Total
		% of		% of
	Amount	Total Amount	Amount	Total Amount	Amount
Activity-Based Costing System
Direct costs:
Direct materials	$1,656,200	?	$4,088,000	?	$5,744,200
Direct labor	228,800	?	584,000	?	812,800
Indirect costs:
Supporting direct labor	177,320	?	452,600	?	629,920
Batch setups	416,000	?	352,000	?	768,000
Product sustaining	355,000	?	355,000	?	710,000
Total cost assigned to products	$2,833,320		$5,831,600		$8,664,920
Costs not assigned to products:
Other					25,680
Total cost					$8,690,600