Reference no: EM132605920

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 Overhead Cost Expected Activity     Activities and Activity Measures      Xtreme         Pathfinder         Total

Supporting direct labor           (direct labor-hours)               $ 642,200                        28,800            70,000            98,800

Batch setups                          (setups)                           915,000                            350                 260               610

Product sustaining                 (number of products)               840,000                          1                     1               2

Other                                                                                72,800                       NA                    NA              NA

Total manufacturing overhead cost                                          $ 2,470,000

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

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