Reference no: EM132644650

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)             $556,000           51,200           60,000           111,200

Batch setups (setups)                                          770,000             430                 340                   770

Product sustaining (number of products)                    400,000               1                      1                     2

Other                                                                  53,200                    NA              NA                       NA

Total manufacturing overhead cost                         $1,779,200

Problem 1: Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

Problem 2: Prepare a quantitative comparison of the traditional and activity-based cost assignments.