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 Gross margin Selling and administrative expenses $ 1,714,000 1, 206,612 507,388 580,000 Net operating loss (72,612) HI-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12.600 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: TSee $ 162,400 S $ 120,000 $ 42,400 8300 Direct materials Direct labor Hanufacturing overhead Cost of goods sold Total 563,300 162,400 480,912 $ 1,206,612 $ 400,900 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $51,000 and $101,000 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 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 S 202,752 117, 260 100, 200 B300 T500 Total 90,900 62, 700 210 153,600 286 76 1. 2. 60,700 NA NA S 480,912 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.