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 below: Sales Hi-Tek Manufacturing Inc. Income Statement Cost of goods sold Gross margin Sales and administrative expenses Net operating loss $2,100,000 1.600.000 500,000 550.000 ($50,000) Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 units of T500 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 labour dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labour B300 T500 Total $436,300 $251,700 $ 688,000 $200,000 $104,000 $ 304,000 Manufacturing overhead Cost of goods sold $ 608,000 $1,600,000 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $50,000 and $100,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. The remainder of the selling and administrative expenses were organization-sustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Activity Activity Cost Pool (and Activity Measures) Manufacturing Overhead B300 T500 Total Machining (machine-hours) $213,500 90,000 62,500 152,500 Setups (setup-hours) 157,500 75 300 375 Product-sustaining (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117.000 NA NA NA Total manufacturing overhead costs $608,000 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. Use the following steps: 1a. Calculate overhead rate using the traditional method.(3 Marks) 1b. Calculate product margins using the traditional method. (10 Marks) 8300 T500 Total 2a. Calculate the activity rate for each activity using ABC. (7 Marks) Activity Budgeted Cost Driver 2b. Compute the Product Margin each model of phone using ABC. (10 Marks) 8300 T500 Rate Total