The ski corporation makes two types of skis - better and great. The data for the two product lines is:

Better Great

Selling price per unit 210 150

Direct materials per unit 110 80

Direct labor per unit 30 15

Direct labor hours per unit 2 1

Estimated annua production 12,500 55,000

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor hours.

Estimated total manufacturing overhead 2,000,000

Estimated total direct labour hours 80,000DLHs

1} Using the data, compute the product margins for the better and great products under the company's traditional costing system. Assume all units are sold.

2} The company is considering replacing its traditional cost system with an activity based costing system that would assign its manufacturing overhead to the following four activity cost pools (the other category contains organized sustaining and idlr capacity costs

Activity and Activity measures est overhead costs expected activity

better good total

Supporting direct labor 784,000 25,000 55,000 80,000

Batch setups 500,000 400 100 500

Product sustaining (# of products) 600,000 1 1 2

Other 116,000 n/a n/a n/a

Total manufacturing overhead 2,000,000

Use the data as a guide compute product margins for the better and good company products under the activity based costing system. Show all work.