Hi$-$Tek Manufacturing, Incorporated, makes two types of industrial component parts$$the B$300$ and the T$500.$ An absorption costing income statement for the most recent period is shown:

Hi$-$Tek Manufacturing Incorporated

Income Statement

Sales $ $1,695,400$

Cost of goods sold $1,209,937$

Gross margin $485,463$

Selling and administrative expenses $590,000$

Net operating loss $ $(104,537)$

Hi$-$Tek produced and sold $60,200$ units of B$300$ at a price of $$20$ per unit and $12,600$ units of T$500$ at a price of $$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:

B$300$ T$500$ Total

Direct materials $ $400,800$ $ $162,900$ $ $563,700$

Direct labor $ $120,700$ $ $42,800163,500$

Manufacturing overhead $482,737$

Cost of goods sold $ $1,209,937$

The company has created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$55,000$ and $$108,000$ of the company$$s advertising expenses could be directly traced to B$300$ and T$500,$ 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$)$ Manufacturing Overhead Activity

B$300$ T$500$ Total

Machining $($machine$-$hours$)$ $ $200,03790,60062,100152,700$

Setups $($setup hours$)121,60074230304$

Product$-$sustaining $($number of products$)101,000112$

Other $($organization$-$sustaining costs$)60,100$ NA NA NA

Total manufacturing overhead cost $ $482,737$

Required:

$1.$ Compute the product margins for the B$300$ and T$500$ under the company$$s traditional costing system.

$2.$ Compute the product margins for B$300$ and T$500$ under the activity$-$based costing system.

$3.$ Prepare a quantitative comparison of the traditional and activity$-$based cost assignments.