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	$140	$99
Direct materials per unit	72	53
Direct labor cost per unit	24	12
Direct labor-hours per unit	2 DLHs	1 DLHs
Estimated annual production and sales	20,000 units	80,000 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	$1,980,000
Estimated total direct labor-hours	120,000 DLHs

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):

Activity and activity measures	Estimated overhead costs	Expected Activity
		Xtreme	Pathfinder	Total
Supporting direct labor (Direct labor hours)	$783,600	40,000	80,000	120,000
Batch set ups (Set ups)	495,000	200	100	300
Product sustaining (number of products)	602,400	1	1	2
Others	99,000	N/A	N/A	N/A
Totals	$1,980,000

Requirements:

a. Compute the total profit for the Xtreme and the Pathfinder products under the companys traditional costing system.

b. Compute the total profit for the Xtreme and the Pathfinder products under the activity-based costing system.

c. Explain why the traditional and activity-based cost overhead assignments differ.