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Hi - Tek Manufacturing, Incorporated, makes two industrial component parts B 3 0 0 and T 5 0 0 . An absorption costing income statement

Hi-Tek Manufacturing, Incorporated, makes two industrial component partsB300 and T500. An absorption costing income statement for the most recent period is shown below:
Hi-Tek Manufacturing, Incorporated
Income Statement
Sales $ 1,697,300
Cost of goods sold 1,247,384
Gross margin 449,916
Selling and administrative expenses 570,000
Net operating loss $ (120,084)
Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $39 per unit. The companys 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 companys two product lines is shown below:
B300 T500 Total
Direct materials $ 400,200 $ 162,300 $ 562,500
Direct labor $ 120,800 $ 42,000162,800
Manufacturing overhead 522,084
Cost of goods sold $ 1,247,384
The company created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $52,000 and $109,000 of the companys 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 companys manufacturing overhead to four activities as shown below:
Activity Cost Pool (and Activity Measure) Manufacturing Overhead Activity
B300 T500 Total
Machining (machine-hours) $ 209,88490,80062,400153,200
Setups (setup hours)151,20076260336
Product-sustaining (number of products)100,800112
Other (organization-sustaining costs)60,200 NA NA NA
Total manufacturing overhead cost $ 522,084
Required:
Compute the product margins for B300 and T500 under the companys traditional costing system.
Compute the product margins for B300 and T500 under the activity-based costing system.
Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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