Required:

1. Compute the product margins for the B300 and T500 under the companys 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.

(For requirement #3)

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 Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,755,600 1,209,565 546,035 560,000 $ (13,965) Hi-Tek produced and sold 60,200 units of B300 at a price of $21 per unit and 12,600 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: 230D $ 400,700 $ 120,500 1500 $ 162,000 $ 42,200 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,700 162, 700 484 165 $ 1,209,565 w has created an activity-based costing system to evaluate the profitability of its prod ed costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $60,000 and $105,000 of the company's advertising expenses could be directly traced to 1300 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 Total Manufacturing Overhead $ 200,925 114,240 100,400 60,600 $ 484,165 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 B300T500 90,300 62,200 72 200 Total 152,500 272 2 NA NA NA 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. B300 T500 Total % of % of Amount Amount Amount Traditional Cost System % % Total cost assigned to products Total cost B300 Total % of Total Amount T500 % of Total Amount Amount Amount Amount Activity-Based Costing System Direct costs: % Indirect costs: T T % Total cost assigned to products Costs not assigned to products: Total cost