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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 Hanufacturing Inc. Incone Statenent Sales $1,640,900 Cost of goods sold 1,215,050 Gross margin 425,850 Selling and administrative expenses 630,000 Net operating loss (204,150) Hi-Tek produced and sold 60,500 units of 8300 at a price of $19 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. 8300 T500 Total Direct materials $ 400,900 $ 162,200 $ 563, 100 Direct labor $ 120,000 $ 42,500 162,500 Manufacturing overhead 489,450 Cost of goods sold $1,215,050 The company has created an activity based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57,000 and $108,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B380 T500 Total Machining (machine-hours) $ 199,030 90,800 62,300 153, 100 Setups setup hours) 127,920 72 240 312 Product-sustaining number of products) 101,600 1 1 2 Other (organization-sustaining costs) 68,900 NA NA NA Total manufacturing overhead cost $ 489,450 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. Complete this question by entering your answers in the tabs below

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