1 Problem 7-16 Comparing Traditional and Activity-Based Product Margins (LO7-1, LO7-3, LO7-4, LO7-5) 5 points Hi-Tek Manufacturing, Inc., makes two types of industrial component partsthe B300 and the T500. An absorption costing income statement for the most recent period is shown: eBook Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,714,000 1,244,230 469, 770 550,000 $ (80,230) Print References Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 T500 Total $ 400,100 $ 163,000 $ 563, 100 $ 120,900 $ 42,200 163, 100 518,030 $1,244,230 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $107,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: B300 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Activity Overhead T500 Total $ 207, 360 91,000 62,600 153,600 150,070 79 270 349 100, 400 1 1 2 60,200 NA NA $ 518,030 Required: 1. Compute the product margins for the B300 and T500 under the company's traditional costing system. 2. Compute the product margins for B300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) B300 T500 Total Product margin $ 0 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) B300 T500 Total Product margin $ 0 Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 Total % of % of Amount Amount Amount Traditional Cost System Direct materials Direct labor % % % % % % $ 0 $ ol $ 0 Total cost assigned to products Selling and administrative Total cost $ 0 B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount % % Activity-Based Costing System Direct costs: Direct materials Direct labor Advertising expense Indirect costs: Product sustaining % % % % % % % % % % $ 0 $ 0 0 Total cost assigned to products Costs not assigned to products: Other Selling and administrative Total cost $ 0