Problem
Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product lines appear below:
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):
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Expected Activity
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Activities and Activity Measures
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Estimated Overhead Cost
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Xtreme
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Pathfinder
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Total
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Supporting Direct Labor (Direct-Labor Hours)
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$588,500
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42,000
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65,000
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107,000
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Batch Set-ups (Set-ups)
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690,000
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390
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300
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690
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Product Sustaining (# of Products)
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500,000
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1
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1
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2
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Other
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40,500
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N/A
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N/A
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N/A
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Total Manufacturing Overhead Cost
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$1,819,000
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Required: Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.