Smoky Mountain Corporation makes two types of hiking boots—theXtreme and the Pathfinder. Data concerning these two product linesappear below:

	Xtreme			Pathfinder
Selling price per unit	$	128.00		$	90.00
Direct materialsper unit	$	63.10		$	50.00
Direct labor perunit	$	12.00		$	8.00
Directlabor-hours per unit		1.5	DLHs		1.0	DLHs
Estimated annualproduction and sales		20,000	units		70,000	units

The company has a traditional costing system in whichmanufacturing overhead is applied to units based on directlabor-hours. Data concerning manufacturing overhead and directlabor-hours for the upcoming year appear below:

Estimated totalmanufacturing overhead	$	2,100,000
Estimated totaldirect labor-hours		100,000	DLHs

Required:

1. Compute the product margins for the Xtreme and the Pathfinderproducts under the company’s traditional costing system.

2. The company is considering replacing its traditional costingsystem with an activity-based costing system that would assign itsmanufacturing overhead to the following four activity cost pools(the Other cost pool includes organization-sustaining costs andidle capacity costs):

	Estimated Overhead Cost			Expected Activity
Activities andActivity Measures				Xtreme	Pathfinder	Total
Supporting direct labor (direct labor-hours)	$	745,000		30,000	70,000	100,000
Batch setups(setups)		612,000		200	160	360
Productsustaining (number of products)		700,000		1	1	2
Other		43,000		NA	NA	NA
Totalmanufacturing overhead cost	$	2,100,000

Compute the product margins for the Xtreme and the Pathfinderproducts under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional andactivity-based cost assignments.