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 $ $1,714,000$

Cost of goods sold $1,256,170$

Gross margin $457,830$

Selling and administrative expenses $580,000$

Net operating loss $ $(122,170)$

Hi$-$Tek produced and sold $60,300$ units of B$300$ at a price of $$20$ per unit and $12,700$ units of T$500$ at a price of $$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 $ $400,900$ $ $162,300$ $ $563,200$

Direct labor $ $120,200$ $ $42,600162,800$

Manufacturing overhead $530,170$

Cost of goods sold $ $1,256,170$

The company has created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$58,000$ and $$110,000$ of the company$$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$)$ $ $205,02090,30062,700153,000$

Setups $($setup hours$)164,25075290365$

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

Other $($organization$-$sustaining costs$)60,500$ NA NA NA

Total manufacturing overhead cost $ $530,170$

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.