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. Income Statement Sales Cost of goods sold $ 1,655,600 1,225,400 Gross margin Selling and administrative expenses Net operating loss 430,200 650,000 $ (219,800) Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,700 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 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 $ 400,600 $ 163,000 $ $ 120,300 $ 42,900 563,600 163,200 498,600 $ 1,225,400 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 $103,000 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) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $ 214,200 123,200 B300 90,500 Activity T500 Total 62,500 78 230 100,600 1 1 153,000 308 2 60,600 NA $ 498,600 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.