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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	$	120.00		$	80.00
Direct materials per unit	$	64.80		$	50.00
Direct labor per unit	$	13.00		$	10.00
Direct labor-hours per unit		1.3	DLHs		1.0	DLHs
Estimated annual production and sales		26,000	units		72,000	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	$1,904,400
Estimated total direct labor-hours	105,800 DLHs

Required:
1.	Compute the product margins for the Xtreme and the Pathfinder products under the companys traditional costing system. (Do not round your intermediate calculations.)

	Xtreme Pathfinder Total Product margin

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):

	Estimated		Expected Activity
Activities and Activity Measures	Overhead Cost		Xtreme	Pathfinder	Total
Supporting direct labor (direct labor-hours)	$	581,900	33,800	72,000	105,800
Batch setups (setups)		650,000	370	280	650
Product sustaining (number of products)		600,000	1	1	2
Other		72,500	NA	NA	NA
Total manufacturing overhead cost	$	1,904,400

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system. (Negative product margins should be indicated with a minus sign. Round your intermediate calculations to 2 decimal places.)

Xtreme Pathfinder Total Product margin

3.	Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3)) The answers in the box below are not correct (amounts )
	Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Traditional Cost System Direct materials $1,856,000 0.6% $3,952,000 0.7% $5,808,000 Direct labor 348,000 0.1% 608,000 0.1% 956,000 Manufacturing overhead 696,000 0.2% 1,216,000 0.2% 1,912,000 Total cost assigned to products $2,900,000 $5,776,000 8,676,000

Xtreme Pathfinder Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Direct materials $ % $ 0.7% $ Direct labor 348,000 0.1% 608,000 0.1% 956,000 Indirect costs: Manufacturing overhead 891,300 0.3% 980,800 0.2% 1,872,100 Total cost assigned to products $3,095,300 $5,540,800 $8,636,100 Costs not assigned to products: 39,900 Total cost $8,676,000

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