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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 $ 1,639,100
Cost of goods sold 1,258,894
Gross margin 380,206
Selling and administrative expenses 650,000
Net operating loss $ (269,794 )

Hi-Tek produced and sold 60,200 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 $ 162,200 $ 562,500
Direct labor $ 120,600 $ 42,800 163,400
Manufacturing overhead 532,994
Cost of goods sold $ 1,258,894

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $50,000 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) $ 212,244 90,900 62,900 153,800
Setups (setup hours) 158,850 73 280 353
Product-sustaining (number of products) 101,800 1 1 2
Other (organization-sustaining costs) 60,100 NA NA NA
Total manufacturing overhead cost $ 532,994

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

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

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
% %
% %
% %
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

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.

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