Hi-Tek Manufacturing, Inc., makes two types of industrial component partsthe B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	1,645,900
Cost of goods sold		1,227,720
Gross margin		418,180
Selling and administrative expenses		580,000
Net operating loss	$	(161,820	)

Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

	B300		T500		Total
Direct materials	$	400,000	$	163,000	$	563,000
Direct labor	$	120,800	$	43,000		163,800
Manufacturing overhead						500,920
Cost of goods sold					$	1,227,720

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $53,000 and $100,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

	Manufacturing Overhead			Activity
Activity Cost Pool (and Activity Measure)				B300	T500	Total
Machining (machine-hours)	$	215,040		90,900	62,700	153,600
Setups (setup hours)		123,480		74	220	294
Product-sustaining (number of products)		101,800		1	1	2
Other (organization-sustaining costs)		60,600		NA	NA	NA
Total manufacturing overhead cost	$	500,920

Required:

1. Compute the product margins for the B300 and T500 under the companys 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.

B300 T500 Total Product margin B300 T500 Total Product margin B300 T500 Total % of % of Amount Amount Amount Traditional Cost System % % % % % Total cost assigned to products Total cost B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: % % % % Indirect costs: % % % % % Total cost assigned to products Costs not assigned to products: Total cost