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 $ 1,755,900 Cost of goods sold Gross margin Selling and administrative expenses 1,239,438 516,462 560, 000 Net operating loss 24 (43,538) Hi-Tek produced and sold 60,400 units of B300 at a price of $21 per unit and 12,500 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: Total 563,100 163,000 513,338 B300 T500 Direct materials Direct labor $ 400, 500 $ 162,600 $ $ 120,100 $ 42,900 Manufacturing overhead Cost of goods sold $ 1,239,438 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $59,000 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: Manufacturing Overhead $ 204,618 Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) B300 T500 Total 90,700 62,000 152, 700 146,520 101,400 68, 800 73 260 333 1 1 2 NA NA NA Total manufacturing overhead cost 338 , $51 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.