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Rocky Mountain Corporation makes two types of hiking boots-Xactive and the Pathbreaker. Data concerning these two product lines appear below:


 Xactive Pathbreaker
 Selling price per unit $ 127.00
$ 89.00
 Direct materials per unit $ 64.80
$ 51.00
 Direct labor per unit $ 18.20
$ 13.00
 Direct labor-hours per unit
1.4 DLHs
1.0 DLHs
 Estimated annual production and sales
25,000 units
75,000 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 $2,200,000           
 Estimated total direct labor-hours 110,000 DLHs

Required:
1.

Compute the product margins for the Xactive and the Pathbreaker products under the company's traditional costing system. (Negative product margins should be indicated with a minus sign.)


     
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 Xactive Pathbreaker Total
  Supporting direct labor (direct labor-hours) $ 797,500 35,000    75,000    110,000  
  Batch setups (setups)
680,000 250    150    400
  Product sustaining (number of products)
650,000 1    1    2
  Other
72,500 NA    NA    NA






  Total manufacturing overhead cost $ 2,200,000









Compute the product margins for the Xactive and the Pathbreaker 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.

Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round intermediate calculations. Round your percentage answers to one decimal place.)


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