Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, 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 $ 1,764,000 1,260,395 503,605 630,000 $ (126,395) Hi-Tek produced and sold 60,000 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: B300 T500 $ 400,300 $ 162,400 $ 120,500 $ 42,800 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,700 163,300 534,395 $ 1,260,395 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 $100,000 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 Overhead $ 206,145 167,850 100, 400 60,000 $ 534,395 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 Activity B300 T500 Total 90,700 62,000 152,700 73 373 1 1 2 NA NA NA 300 Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company's 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 Required 1 Required 2 Required 3 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 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.) 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