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

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		Expected 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 3.Prepare a quantitative comparison of the traditional and activity-based cost assignments