Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, L07-3, 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: Hi-Tek Manufacturing Inc. Income Statement $ 1,714,000 1,244,044 469,956 570,000 (100,044) Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,700 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: B300 T500 Total $ 400,900 $ 162,500 $ S 120,500 Direct materials 563,400 163,100 517,544 Direct labor $42,600 Manufacturing overhead S 1,244,044 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 $52,000 and $106,000 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: The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $106,000 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) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) T500 Total Overhead B300 201,564 154,980 100,200 60,800 90,100 62,600 290 152,700 369 79 1 1 2 NA NA NA Total manufacturing overhead cost 517,544 Required 1 Required 2 Required 3 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.) 00 500 Total % of % of Amount Amount Amount Traditional Cost System % % % Total cost assigned to products Total cost Total B300 T500 % of % 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 Total cost