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PROBLEM 7-16 Comparing Traditional and Activity-Based Product Margins fL-07-1, L07-3, L07-4, L07-5] Hi-Tek Manufacturing Ine, 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 produced and sold 70.000 units of B300 at a price of $20 per unit and 17.500 units of T 500 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: The company has created an activity based costing sysiem to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $500000 and 5100.000 of the company's advertising expenses coald be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC ream also distributed the company's manufacturing overhead to four activities as shown below: Required: 1. Using Exhibit 7-13 as a guide, compute the product margins for the B300 and T500 under the company's traditional costing system. 2. Using Exhibit 711 as a guide, compute the product margins for B300 and T 500 under the activity-based costing system 3. Using Exhibit 7-14 as a guide. prepare a quantitative comparison of the traditional and activity-based cost assignments. Explain why the traditional and activity-based cost assignments differ. PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins [L.07-1, L07-3, L07-4

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