Problem 7-16 Comparing Traditional and Activity-Based Product Margins (L07-1, 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 $ 1,697,400 Cost of goods sold Gross margin 467,207 Selling and administrative expenses 640,000 Net operating 10. $ (172,793) Sales 1,230, 193 Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,600 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 B300 1500 Total $ 400, 800 $ 162,700 $ 563,500 $ 120,100 $ 42,700 162,800 503,893 $ 1,230, 193 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $103,000 of the company's adyertising 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 Cont Pool (and Activity Measure) Machining machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead coat Manufacturing Overhead $ 199,513 142,680 101,600 60,100 $ 503,893 Activity B300 T500 Total 90,200 62,100 152,300 78 270 348 1 2 NA NA NA 1 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 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decim 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 Direct materials Direct labor Manufacturing overhead Total cost assigned to products % % $ 0 S 0 $ S 0 Total cost B300 T500 Total % of % of Total Amount Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Direct materials % % Direct labor % % % % Indirect costs: % % % % % % $ 0 Total cost assigned to products Costs not assigned to products: $ 0 0 Total cost 0