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The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $51,000 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: 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 $ 201,036 131,040 100,800 60,300 $ 493,176 Activity B300 T500 Total 90,100 62,200 152,300 72 240 312 1 1 2 NA NA NA 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 Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,712,000 1,219,276 492,724 610,000 $ (117,276) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 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 $ 400,600 $ 120,600 T500 $ 162,200 $ 42,700 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,800 163,300 493,176 $ 1,219,276 B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % % % Indirect costs: % % % % % % $ 0 0 0 Total cost assigned to products Costs not assigned to products: Total cost $ 0

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