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Problem 7-16 Comparing Traditional and Activity-Based Product Margins (L07-1, LO7-3, L07-4, L07-5) Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B300 and the

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Problem 7-16 Comparing Traditional and Activity-Based Product Margins (L07-1, LO7-3, L07-4, L07-5) 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 Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,768,000 Cost of goods sold 1,230, 432 Gross margin 537,568 Selling and administrative expenses 57e, eee Net operating loss $ (32,432) Hi-Tek produced and sold 60,000 units of B300 at a price of $21 per unit and 12,700 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, 600 $ 162,300 $ 562,900 $ 120,600 $ 42,8ee 163, 4ee 504,132 $ 1,230, 432 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $59,000 and $105,000 of the company's advertising expenses could be directly traced to 1300 and 1500, 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 $ 209,062 134,07e 100,800 60,200 $504,132 8300 90,600 77 1 NA Activity Tsee 62, eee 250 1 NA Total 152,600 327 2 NA ILUUDI-SUstaining in nature. The ABC team als Lloy uvelhead 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 $ 209,662 134,070 100,80e 60,200 $ 504,132 Bee 90,600 77 1 NA Activity T5e 62,00 250 1 NA Total 152,600 327 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 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 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 $ 0 Shequired Required 2 > 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 $ 5 0 S 0 Total cost $ o B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % Indirect costs % % 0 $ 0 $ Total cost assigned to products Costs not assigned to products $ 0 Total cost

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