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.

income statement for the most recent period is shown: Hi-Tek Manufacturing Incorporated Income Statement Sales $ 1,689,500 Cost of goods sold 1, 244, 288 Gross margin 445,212 Selling and administrative expenses 640,000 Net operating loss $ (194, 788) Hi-Tek produced and sold 60,100 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 $ 400,900 $ 120,900 T500 $ 162,000 $ 42,200 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,900 163, 100 518,288 $ 1,244, 288 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $54,000 and $104,000 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 $ 209,168 147,420 100,800 60,900 $ 518, 288 B300 90,900 71 1 NA Activity T500 62,900 280 1 NA Total 153,800 351 2 NA