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.