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

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

 XtremePathfinderSelling price per unit$120.00  $87.00 Direct materials per unit$63.60  $55.00 Direct labor per unit$12.00  $10.00 Direct labor-hours per unit 1.2DLHs  1.0DLHsEstimated annual production and sales 25,000units  72,000units 

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$2,040,000  Estimated total direct labor-hours 102,000 DLHs 


1. Compute the product margins for the Xtreme and the Pathfinder products under the company’s traditional costing system. (Do not round your intermediate calculations.)

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):   


 EstimatedActivityActivities and Activity MeasuresOverhead Cost  Xtreme  Pathfinder  Total Supporting direct labor (direct labor-hours)$622,200   30,000  72,000  102,000 Batch setups (setups) 644,000   250  210  460 Product sustaining (number of products) 700,000   1  1  2 Other 73,800   NA  NA  NA Total manufacturing overhead cost$2,040,000            

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.)

3. Show a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your “Percentage” answer to 1 decimal place

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