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 $ $1,751,400$

Cost of goods sold $1,229,098$

Gross margin $522,302$

Selling and administrative expenses $620,000$

Net operating loss $ $(97,698)$

Hi$-$Tek produced and sold $60,000$ units of B$300$ at a price of $$21$ per unit and $12,600$ units of T$500$ at a price of $$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 $ $400,400$ $ $162,700$ $ $563,100$

Direct labor $ $120,100$ $ $42,100162,200$

Manufacturing overhead $503,798$

Cost of goods sold $ $1,229,098$

The company has created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$57,000$ and $$108,000$ of the company$$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$)$ $ $212,94890,80062,400153,200$

Setups $($setup hours$)129,15075240315$

Product$-$sustaining $($number of products$)101,000112$

Other $($organization$-$sustaining costs$)60,700$ NA NA NA

Total manufacturing overhead cost $ $503,798$

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.