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

Hi$-$Tek Manufacturing, Incorporated

Income Statement

Sales $ $1,697,300$

Cost of goods sold $1,241,830$

Gross margin $455,470$

Selling and administrative expenses $550,000$

Net operating loss $ $(94,530)$

Hi$-$Tek produced and sold $60,100$ units of B$300$ at a price of $$20$ per unit and $12,700$ units of T$500$ at a price of $$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 $ $400,800$ $ $162,500$ $ $563,300$

Direct labor $ $120,000$ $ $42,700162,700$

Manufacturing overhead $515,830$

Cost of goods sold $ $1,241,830$

The company created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$51,000$ and $$109,000$ of the company$$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$)$ $ $204,35090,20062,300152,500$

Setups $($setup hours$)150,78079280359$

Product$-$sustaining $($number of products$)100,400112$

Other $($organization$-$sustaining costs$)60,300$ NA NA NA

Total manufacturing overhead cost $ $515,830$

Required:

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

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

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