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 $1,697,300 Cost of goods sold 1,262,706 Gross margin 434,594 Selling and administrative expenses 620,000 Net operating loss $ (185,406) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 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 8300 T500 $400,100 $162,600 $ $120,300 $ 42,900 Total 562,700 163,200 536,806 $1,262,706 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $109,000 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) Activity Manufacturing Overhead $213,226 B300 T500 Total 90,800 62,600 153,400 Setups (setup hours) 161,480 77 290 367 Product-sustaining (number of products) 101,800 1 1 2 Other (organization-sustaining costs) 60,300 NA NA NA Total manufacturing overhead cost $536,806 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.