Hi-Tek manufacturing Inc. Provides two types of commercial component parts-the B300 and the T500. An absorb costing earnings statement for the many recent period is displayed below:Hi-Tek production Inc.Income StatementSales............................................ $2,100,000Cost of items sold............................. 1,600,000Gross margin....................................... 500,000Selling and administrative costs ........... 550,000Net operating loss................................ $ (50,000)Hi-Tek produced and also sold 70,000 systems of B300 at a price that $20 per unit and 17,500 units of T500 at a price of $40 every unit. The company"s traditional cost mechanism allocates production overhead to commodities using a plant large overhead rate and also direct labor dollars together the allocation base. Additional information relating to the company"s 2 product lines is presented below:

The agency has created an activity-based costing system to evaluate the benefit of its products. Hi-Tek"s abc implementation team concluded that $50,000 and also $100,000 the the company"s advertising expenses could be directly traced to B300 and also T500, respectively. The remainder the the selling and also administrative costs was organization-sustaining in nature.The abc team likewise distributed the company"s production overhead to four activities as presented below:


Required:1. Utilizing Exhibit 6-13 as a guide, compute the product margins for the B300 and also T500 under the company"s classic costing system.Exhibit 6-13 Product Margins-Traditional Costing System


2. Using Exhibit 6-11 as a guide, compute the product margins for B300 and also T500 under the activity-based costing system.Exhibit 6-11: Product Margins-Activity-Based Costing


3. Using Exhibit 6-14 as a guide, prepare a quantitative to compare of the traditional and task based cost assignments. Explain why the traditional and also activity-based cost assignments differ?Exhibit 6-14: A to compare of Traditional and also Activity-Based cost Assignments


Precision Manufacturing

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B300 T500 complete Manufacturing overhead expense of items sold $200,000 $104,000 304,000 608,000 $1,600,000o activity Manufacturing Overhead task Cost pool (and activity Measure) B300 T500 full $213,500 90,000 62,500 152,500 375 2 NA 157,500 120,000 117,000 $608,000 75 300 Product-sustalning (number that products) other (organization-sustalning costs). Total manufacturing overhead cost NA NA F G H 1 Product Margins-Traditional price System tradition Compass Housings 2 3 Sales 4 cost of items sold: 5 straight materials 6 straight labor 7 production overhead 8 Product margin 9 Selling and administrative 10 net operating earnings Standard Stanchions complete 2,660,000 540,000 3,200,000 69,500 87.500 S 905,500 s 975.000 351.250 263,750 875 0002044 250 873,750 :D: E 1 Product Margins-Activity-Based Costing traditional Stanchions tradition Compass Housings 540,000 2,660,000 3 Sales 4 expenses 5 straight materials 6 straight labor 7 Shipping 8 client orders (from exhibit 6-9) 9 Product design (from exhibition 6-9) 10 Order size (from exhibit 6-9) 11 full cost 2 Product margin 13 905,500 263,750 60,000 192,000 $ 69,500 87,500 5,000 128,000 252,000 1753 750 589.500 HMEExhibit 6-7 exhibit 6-9Exhibit 6-10Exhibit 6-11 exhibition 6-0 DEF traditional Stanchions practice Compass Housings 2 timeless Cost device 3 direct matenals 4 straight labor 5 production overhead quantity %" Amount% Tota s 905,500 92.9% S 69.500 7.1% $975,000 263,750 75.1% 87,500 24.9% 351,250 875000 87.5% -125.000 12.5% 1.000.000 2,326,250 total cost assigned to commodities T Selling and also administrative 8 full cost $2.044 250 0 Activity-Based Costing mechanism 11 Direct expenses 12 Drect products 13 straight labor 14 Shipping 15 Indirect costs: 16 customer orders $ 905,500 263,750 60,000 92.9% 75.1% 92.3% S 69.500 87,500 5,000 24. 9% 7.7% 7.1% $975,000 351,250 65,000 192,000 60.0% 128,000 40.0% 0.0% 252,000 100.0% 12.6% 320,000 262,000 380000 2,343,250 17 Product style 18 stimulate sizo -332.500875% $1753 750 -47 500 19 complete cost assigned to products 21 prices not assigned come products: 22 Customer connections 23 various other 367.500 24 total cost 25 26 The percentages space rounded to the nearest tenth the a percent. 27 HFhit 6-1 it6-13Fxhiit 6-14 Fxhhit 6A-1Fhhit4