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 produced and sold 60,300 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $52,000 and $102,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

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.

Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,710,000 1,239, 616 470,384 590,000 $ (119,616) Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 T500 Total $ 400,700 $ 162,300 $ 563,000 $ 120,600 $ 42,300 162,900 513,716 $ 1,239,616 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 Manufacturing Overhead $ 201,696 150,920 100,800 60,300 $ 513,716 B300 90,500 73 1 NA Activity T500 Total 62,300 152,800 270 343 1 2 NA NA Compute the product margins for the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) B300 T500 Total Product margin Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) B300 T500 Total Product margin 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 and and other answers to the nearest whole dollar amounts.) B300 T500 Total % of % of Amount Amount Amount Traditional Cost System 96 %6 96 %6 96 96 Total cost assigned to products Total cost B300 T500 Total % of % of Total Amount Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: 96 %6 96 %6 96 %6 Indirect costs: % % 96 %6 96 96 Total cost assigned to products Costs not assigned to products: Total cost