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Smoky Mountain Corporation makes two types of hiking bootsthe Xtreme and the Pathfinder. Data concerning these two product lines appear below:

Xtreme			Pathfinder
Selling price per unit	$	141.00		$	91.00
Direct materials per unit	$	64.50		$	52.00
Direct labor per unit	$	17.00		$	10.00
Direct labor-hours per unit		1.7	DLHs		1.0	DLHs
Estimated annual production and sales		23,000	units		74,000	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$2,714,400 Estimated total direct labor-hours 113,100DLHs

Required:

2. 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):

Activities and Activity Measures	Xtreme	Pathfinder	Total
Supporting direct labor (direct labor-hours)	$	791,700		39,100	74,000	113,100
Batch setups (setups)		1,062,000		340	250	590
Product sustaining (number of products)		790,000		1	1	2
Other		70,700		NA	NA	NA
Total manufacturing overhead cost	$	2,714,400

compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

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

Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Traditional Cost System % % % % % % Total cost assigned to products $0 $0 $0 Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % Indirect costs: % % % % % % Total cost assigned to products $0 $0 $0 Costs not assigned to products: Total cost

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