Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins (L07-1, L07-3, L07-4, LO7-5) Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts--the 8300 and the T500. An absorption costing income statement for the most recent period is shown: HI-Tek Manufacturing Incorporated Income Statement Sales $ 1,695,500 Cont of goods sold 1,248,140 Gross margin 447.360 Selling and administrative expenses 610,000 Net operating loss $ 1162,640) Hi-Tek produced and sold 60,400 units of 8300 at a price of $20 per unit and 12,500 units of T500 at a price of $39 per unit. The company's 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 company's two product lines is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold BJ00 $ 400, 400 $ 120,00 T500 $ 162, 100 $ 42,700 Total $.562,500 16),500 522,140 $ 1,248,140 The company has created an activity based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $54,000 and $110,000 of the company's 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 company's manufacturing overhead to four activities as shown below. Manufacturing Activity Activity Cost Pool and Activity Measure) Overhead 1300 9500 Total Machining machine-hours) $ 200, 760 50.800 62,700 153,500 Setups (setup hours) 152,880 74 290 364 Product-sustaining inumber of products) 100,400 Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 $ 400, 400 $ 120,800 T500 $ 162,100 $ 42,700 Total $ 562,500 163,500 522,140 $ 1,248, 140 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $54,000 and $110,000 of the company's advertising expenses could be directly traced to 8300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $ 208,760 152,880 100,400 60,100 $ 522,140 B300 90,800 74 1 NA Activity T500 62,700 290 1 NA Total 1531500 364 2 NA Required: 1. Compute the product margins for the B300 and T500 under the company's traditional costing system. 2. Compute the product margins for B300 and 1500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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.) Required: 1. Compute the product margins for the B300 and T500 under the company's 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for 8300 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 0 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 a places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 % of % of Total Amount Amount Amount $ 400,400 71.21 $ 28.8 Traditional Cost System Direct materials Direct labor Manufacturing overhead Total cost assigned to products Selling and administrative Total cost 120,800 385,352 906,552 162, 100 42,700 136,213 341,013 73.8 26.2 $ $ $ 0 $ 0 B300 T500 Total Amount % of Total Amount % of Total Amount Amount Amount 71.25 $ Activity-Based Costing System Direct costs: Direct materials Direct labor Advertising expense Indirect costs: Machining Setups Product sustaining 400,400 120,800 54,000 162,100 42,700 110,000 B300 T500 Total Amoun: % of Total Amount % of Total Amount Amount Amount 71.21 $ 400,400 120,800 54,000 162,100 42,700 110,000 Activity-Based Costing System Direct costs: Direct materials Direct labor Advertising expense Indirect costs: Machining Setups Product sustaining Total cost assigned to products Costs not assigned to products: Other Selling and administrative Total cost $ 575,200 $ 314,800 0 $ 0