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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 Manufacturing Inc. Income Statement
Sales	$	1,761,600
Cost of goods sold		1,233,586
Gross margin		528,014
Selling and administrative expenses		590,000
Net operating loss	$	(61,986	)

Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,700 units of T500 at a price of $39 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:

	B300		T500		Total
Direct materials	$	400,600	$	162,700	$	563,300
Direct labor	$	121,000	$	43,000		164,000
Manufacturing overhead						506,286
Cost of goods sold					$	1,233,586

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $58,000 and $107,000 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:

	Manufacturing Overhead			Activity
Activity Cost Pool (and Activity Measure)				B300	T500	Total
Machining (machine-hours)	$	210,726		90,500	62,200	152,700
Setups (setup hours)		134,160		72	240	312
Product-sustaining (number of products)		100,600		1	1	2
Other (organization-sustaining costs)		60,800		NA	NA	NA
Total manufacturing overhead cost	$	506,286

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.

Chapter Seven Problems (10 pts.) 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 points Traditional Cost System Total cost assigned to products Total cost B300 T500 Total References %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

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