Problem 7-16 (Static) Comparing Traditional and Activity-Based Product Margins (L07-1, L07-3, 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 Sales $2,100,000 Cost of goods sold 1,600,000 Gross margin 500,000 Selling and administrative 550,000 expenses Net operating loss $ (50,000) Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17.500 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 T500 Total $436,300 $251,700 $ 688,000 $200,000 $104,000 304,000 608,000 $1,600,000 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $50,000 and $100,000 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 Activity Cost Pool (and Manufacturing Activity Measure) Overhead B300 1500 Total Machining (machine-hours) $213,500 90,000 62,500 152,500 Setups (setup hours) 157,500 75 300 375 Product-sustaining (number of products) 120,000 1 2 Other (organization- sustaining costs) 117,000 NA NA NA Total manufacturing overhead cost $ 608,000 1 Required: 1. Compute the product margins for the 8300 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. Compute the product margins for the B300 and 1500 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. 3 Required Required Required 1 2 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place.) Total B300 % of Amount Total Amount T500 % of Amount Total Amount Amount Traditional Cost System % % % % % % Total cost assigned to products $ 0 $ 0 $ 0 Total cost $ 0 B300 % of T500 % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % % % Indirect costs: % % % % % % $ Total cost assigned to products Costs not assigned to products: 0 $ 0 $ 0 Total cost $ 0