Hi-Tek Manufacturing, Inc., makes two types of industrial component parts- the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Other (organization-sustaining costs) Total manufacturing overhead cost Income Statement Sales Cost of goods sold Gross margin $1,637,200 1,223,276 413,924 Selling and administrative expenses Net operating loss 600,000 $ (186,076) Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,700 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 T500 Total $400,300 $162,100 $562,400 $120,600 $ 42,600 163,200 497,676 $1,223,276 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 $106,000 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) Manufacturing Overhead $ 207,536 128,040 102,000 Activity B300 T500 Total 90,200 62,400 152,600 71 220 291 1 1 2 60,100 NA NA NA $ 497,676 Required: 1. Compute the product margins for the B300 and T500 under the company's 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.