XYZ Company has the following data from its costing system regarding its two product lines, A1 and B1:

	A1	B1
Selling price per unit	$140	$99
Direct materials per unit	$72	$53
Direct labor per unit	$24	$12
Direct labor hours per unit	2.0 DL Hrs	1.0 DL Hrs
Estimated annual production and sales	20,000 units	80,000 units

Using a traditional system, the company would apply manufacturing overhead to the units based on direct labor-hours for the upcoming period as follows:

Estimated total manufacturing overhead	$1,980,000
Estimated total direct labor-hours	120,000 DL Hrs

Using an activity-based costing system, the company would assign manufacturing overhead to the following four activity cost pools. The "Other" cost pool includes organization-sustaining costs and idle capacity costs.

	Estimated Overhead Cost	A1 Expected Activity Level	B1 Expected Activity Level	Total Expected Activity Level
Supporting direct labor (direct labor hours)	$783,600	40,000	80,000	120,000
Batch setups (setups)	$495,000	200	100	300
Product sustaining (number of products)	$602,400	1	1	2
Other	$99,000	NA	NA	NA
Total manufacturing overhead cost	$1,980,000

1. (8 points) Compute Product Margins for the A1 and B1 products using the traditional costing system (present your margins in an income statement format similar to Exhibit 6-13 in the textbook).

2. (12 points) Compute Product Margins for the A1 and B1 products using the activity-based costing system (present your margins in an income statement format similar to Exhibit 6-11 in the textbook).

3. (4 points) Based on your analysis above, estimate how much manufacturing overhead was allocated under the traditional costing system to (i) batch setups, and (ii) product sustaining activities for A1 and B1.