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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

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:

Hi-Tek Manufacturing Inc. Income Statement
Sales $ 1,642,900
Cost of goods sold 1,223,872
Gross margin 419,028
Selling and administrative expenses 560,000
Net operating loss $ (140,972 )

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 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 $ 400,300 $ 162,000 $ 562,300
Direct labor $ 121,000 $ 42,600 163,600
Manufacturing overhead 497,972
Cost of goods sold $ 1,223,872

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $56,000 and $103,000 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:

Manufacturing Overhead Activity
Activity Cost Pool (and Activity Measure) B300 T500 Total
Machining (machine-hours) $ 202,752 90,700 62,900 153,600
Setups (setup hours) 133,320 73 230 303
Product-sustaining (number of products) 101,000 1 1 2
Other (organization-sustaining costs) 60,900 NA NA NA
Total manufacturing overhead cost $ 497,972

Required:

1. Compute the product margins for the B300 and T500 under the companys 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.

immediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

B300 T500 Total
Product margin $0

immediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)

B300 T500 Total
Product margin $0

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 other answers to the nearest whole dollar amounts.)

B300 T500 Total
% of % of
Amount Amount Amount
Traditional Cost System
% %
% %
% %
Total cost assigned to products $0 $0 $0
Total cost $0
B300 T500 Total
% of % of
Amount Total Amount Amount Total Amount Amount
Activity-Based Costing System
Direct costs:
% %
% %
% %
Indirect costs:
% %
% %
% %
Total cost assigned to products $0 $0 0
Costs not assigned to products:
Total cost $0

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