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 $ $1,644,000$

Cost of goods sold $1,251,470$

Gross margin $392,530$

Selling and administrative expenses $620,000$

Net operating loss $ $(227,470)$

Hi$-$Tek produced and sold $60,000$ units of B$300$ at a price of $$19$ per unit and $12,600$ units of T$500$ at a price of $$40$ 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 $ $400,400$ $ $162,200$ $ $562,600$

Direct labor $ $120,800$ $ $42,800163,600$

Manufacturing overhead $525,270$

Cost of goods sold $ $1,251,470$

The company has created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$60,000$ and $$101,000$ of the company$$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$)$ $ $201,30090,20062,300152,500$

Setups $($setup hours$)162,97079300379$

Product$-$sustaining $($number of products$)100,200112$

Other $($organization$-$sustaining costs$)60,800$ NA NA NA

Total manufacturing overhead cost $ $525,270$

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.