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.

Hi-Tek Manufacturing Inc. 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 Manufacturing Inc Income Statement Sales Cost of goods sold $1,697,500 1,215,597 Gross margin Selling and administrative expenses 481,903 590,000 Net operating loss $ (108,097) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12,500 units of T500 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: B300 T500 Total Direct materials Direct labor Manufacturing overhead $ 400,500 $162,000 $ 562,500 162,500 490,597 $120,000 $42,500 Cost of goods sold $ 1,215,597 The company has created an activity-based costing system to evaluate the profitability of its products. Hi- Tek's ABC implementation team concluded that $52,000 and $102,000 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