Hi-Tek Manufacturing, Incorporated, 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 Incorporated Income Statement
Sales	$ 1,633,200
Cost of goods sold	1,226,110
Gross margin	407,090
Selling and administrative expenses	610,000
Net operating loss	$ (202,910)

Hi-Tek produced and sold 60,300 units of B300 at a price of $19 per unit and 12,500 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	$ 401,000	$ 162,700	$ 563,700
Direct labor	$ 120,500	$ 42,600	163,100
Manufacturing overhead			499,310
Cost of goods sold			$ 1,226,110

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 $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)	$ 199,030	90,800	62,300	153,100
Setups (setup hours)	138,180	79	250	329
Product-sustaining (number of products)	101,600	1	1	2
Other (organization-sustaining costs)	60,500	NA	NA	NA
Total manufacturing overhead cost	$ 499,310

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