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Hi-Te Manufacturing, Inc., makes two types of industrial component parts--the 8300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc, Income Statement Sales $ 1,759,800 Cost of goods sold 1.221, 588 Gross margin 538,212 Selling and administrative expenses 590, Bee Net operating loss $ (51,788) Hi-Tek produced and sold 60,400 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. Direct materials Direct labor Manufacturing overhead Cost of goods sold 3300 T500 Total $ 400, 400 $ 162,900 $ 563,300 $ 120, see $ 42,200 162,700 495,588 $ 1,221,588 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $56,000 and $110,000 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 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 $285,288 130,000 100,000 60,300 $ 495,588 Activity B300 Tsee 90,400 62,800 75 250 1 1 NA NA Total 153,280 325 2 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

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