Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and the T500. Arn absorption costing income statement for the most recent period is shown below Tek Manufacturing Inc. Statement Sales Cost of goods sold $1,705,300 1,219,117 Gross margin Selling and administrative expenses 486,183 640,000 Net operating loss $(153,817) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $39 per unit. The company's traditional cost system allocates manufacturin 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 Direct labor Manufacturing overhead S 400,200 162,700 562,900 S 120,200 42,200 162,400 493,817 Cost of goods sold S 1,219,117 The company has created an activity-based costing system to evaluate the profitability of its products. Hi- Tek's ABC implementation team concluded that $54,000 and $104,000 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 Manufacturing Overhead Cost Pool (and Activity Measure B300 T500 Total