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Problem 7-16 Comparing Traditional and Activity-Based Product Margins ILO7-1, LO7-3, LO7-4, LO7-5] 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 below Hi-Tek Manufacturing Inc Income Statement $1,753,500 Sales 1,253,548 Cost of goods sold Gross margin 499,952 Selling and administrative expenses 580,000 (80,048) Net operating loss Hi-Tek produced and sold 60,100 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 B300 T500 Total Direct materials 400,600 162,500 563,100 120,700 42,100 162,800 Direct labor Manufacturing overhead 527,648 1,253,548 Cost of goods sold The company has created an activity-based costing system to evaluate the profitability of its products. Hi Tek's ABC implementation team concluded that $55,000 and $105,000 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