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 partsthe B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales $ 1,720,000 Cost of goods sold 1,228,845 Gross margin 491, 155 Selling and administrative expenses 550,000 Net operating loss $ (58,845) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,800 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 $ 400,900 $ 162,900 $ 563,800 Direct labor $ 120,800 $ 42,800 163,600 Manufacturing overhead 501, 445 Cost of goods sold $1,228,845 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 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. Activity Overhead B300 T500 Total $ 208,925 90,500 62,000 152,500 132,020 72 250 322 100,400 1 1 2 60, 100 NA NA NA $501,445 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. 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 1500 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 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 calcul places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 Total % of % of T500 Amount Amount Amount Traditional Cost System % % % % % % Total cost assigned to products Total cost B300 T500 Total