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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 $ 141.00 $ 91.00
Direct materials per unit $ 64.50 $ 52.00
Direct labor per unit $ 17.00 $ 10.00
Direct labor-hours per unit 1.7 DLHs 1.0 DLHs
Estimated annual production and sales 23,000 units 74,000 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 $2,714,400
Estimated total direct labor-hours 113,100 DLHs

Required:
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) $ 791,700 39,100 74,000 113,100
Batch setups (setups) 1,062,000 340 250 590
Product sustaining (number of products) 790,000 1 1 2
Other 70,700 NA NA NA
Total manufacturing overhead cost $ 2,714,400

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.)

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))

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