Hi$-$Tek Manufacturing, Inc., makes two types of industrial component parts$-$the B$300$ and the

T$500.$ An absorption costing income statement for the most recent period is shown:

Hi$-$Tek Manufacturing Inc.

Income Statement

Sales

Cost of goods sold

Gross margin

Selling and administrative expenses

Net operating loss

$$2,100,000$

$1\mathrm{.}600\mathrm{.}000$

$500,000$

$550,000$

$

$(50,000)$

Hi$-$Tek produced and sold $70,000$ units of B$300$ at a price of $$20$ per unit and $17,500$ units of T$500$ at a price of $$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

$8300$

$$436,300$

$$200,000$

$1500$

$$251,700$

$$104,000$

Total

$

$688,000$

$304,000$

$608\mathrm{.}000$

$$1,600\mathrm{.}000$

The company has created an activity$-$based costing system to evaluate the profitability of its prod$-$ucts. Hi$-$Tek's ABC implementation team concluded that $$50,000$ and $$100,000$ of the company's advertising expenses could be directly traced to B$300$ and T$500,$ Tespectively. 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:

Activity Cost Pool $($and Activity Measure$)$

Manufacturing

Overhead

Activity

B$300$

T$500$

Total

Machining $($machine$-$hours$).$

$$213,500$

$90,000$

$62,500$

$152,500$

Setups $($setup hours$)$

$157,500$

$75$

$300$

$375$

Product$-$sustaining $($number of products$)$

$120,000$

$1$

$1$

$2$

Other $($organization$-$sustaining costs$)$

$117,000$

NA

NA

NA

Total manufacturing overhead cost.

$$608,000$