Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, 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 Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,689, 500 1,244,662 444,838 620,000 $ (175,162) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,500 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: B300 $ 400,480 $ 120,2ee 42,400 T500 Total Direct materials Direct labor Manufacturing overhead Cost of goods sold 162,100 $ 562,50e 162,600 519, 562 $ 1,244,662 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $106,000 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