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 $ 1,709,200 Cost of goods sold 1,212,936 Gross margin 496,264 Selling and administrative expenses 560,000 Net operating loss $ (63,736 ) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12,800 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 $ 400,800 $ 162,700 $ 563,500 Direct labor $ 120,100 $ 42,400 162,500 Manufacturing overhead 486,936 Cost of goods sold $ 1,212,936 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $53,000 and $106,000 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) $ 202,356 90,500 62,800 153,300 Setups (setup hours) 122,980 76 210 286 Product-sustaining (number of products) 100,600 1 1 2 Other (organization-sustaining costs) 61,000 NA NA NA Total manufacturing overhead cost $ 486,936 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.

	B300			T500			Total
		% of			% of
	Amount			Amount			Amount
Traditional Cost System
Direct labor			%			%
			%			%
			%			%
Total cost assigned to products
Total cost
	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
Costs not assigned to products:
Total cost