Problem 7-16 Comparing Traditional and Activity-Based Product Margins ILO7-1, Lo7- 3, Lo7-4, Lo7-5] Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent period is shown below Hi-Tek Manufacturing Inc Income Statement Sales $2,100,000 1,600,000 Cost of goods sold 500,000 Gross margin Selling and administrative expe 550,000 (60,000) Net operating loss Hi-Tek produced and sold 70,000 units of B300 at a price of$20 per unit and 17,500 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 Total Direct materials $436,300 $251,700 688,000 Direct labor 304,000 $200,000 $104,000 608,000 Manufacturing overhead Cost of goods sold 1,600,000