Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, L07-4, LO7-5) 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 Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,774,500 1,239, 780 534,720 630,000 $ (95,280) Hi-Tek produced and sold 60,500 units of B300 at a price of $21 per unit and 12,600 units of T500 at a price of $40 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 B300 T500 Total $ 400,100 $ 162,800 $ 562,900 $ 120,200 $ 42,300 162,500 514,380 $ 1,239, 780 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $60,000 and $108,000 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: 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 $ 213,920 139,860 100,000 60,600 $ 514,380 Activity B300 T500 Total 90,800 62,000 152,800 73 260 333 1 1 2 NA NA NA Required: 1. Compute the product margins for the B300 and 1500 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