Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LC7-3, LO7-4, LC 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 1,644,000 Sales Cost of goods sold 1,221,237 Gross margin 422,763 580,000 Selling and administrative expenses (157,237) Net operating loss Hi-Tek produced and sold 60,000 units of B300 at a price of $19 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 Total B300 T500 Direct materials 400,100 162,600 562,700 120,500 42,200 162,700 Direct labor Manufacturing overhead 495,837 1,221,237 Cost of goods sold