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Kragan Clothing Company manufactures its own designed and labeled athletic wear and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used traditional costing in assigning its selling costs to its product lines. Selling costs have traditionally been assigned to Kragan's product lines at a rate of 70% of direct materials costs. Its direct materials costs for the month of March for Kragan's "high-intensity line of athletic wear are $395,000. The company has decided to extend activity-based costing to its selling costs. Data relating to the "high-intensity" line of products for the month of March are as follows. Number of Cost Drivers Used per Activity Over $936,000 290 Activity Cost Cost Overhead Pools Drivers Rate Sales Dollar Sales Dollar sales commissions $0.05 per dollar P. sales Advertising-TV Minutes $300 per minute Advertising Column Internet inches Catalogs Catalogs mailed $2.50 per catalog Cost of catalog Catalog ti per catalog sales orders Credit and collection Dollar sales $0.03 per dollar Sales DU. sales $10 per column 2,100 59,800 $1 order 9,250 $936,000 "(a) Your answer is correct. Compute the selling costs to be assigned to the "high-intensity" line of athletic wear for the month of March (1) using the traditional product costing system (direct materials cost is the cost driver), and (2) using activity-based costing. Traditional product costing Activity-based costing $1276,500 $1341,630 Selling cost to be assigned *(b) By what amount does the traditional product costing system undercost or overcost the "high-intensity product line

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