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 $ 1,701,300

Cost of goods sold 1,214,354

Gross margin 486,946

Selling and administrative expenses 620,000

Net operating loss $ (133,054 )

Hi-Tek produced and sold 60,300 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:

B300 T500 Total

Direct materials $ 400,100 $ 162,400 $ 562,500

Direct labor $ 120,900 $ 42,100 163,000

Manufacturing overhead 488,854

Cost of goods sold $ 1,214,354

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 $107,000 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 Activity

Activity Cost Pool (and Activity Measure) B300 T500 Total

Machining (machine-hours) $ 204,554 90,800 63,000 153,800

Setups (setup hours) 122,000 75 230 305

Product-sustaining (number of products) 101,600 1 1 2

Other (organization-sustaining costs) 60,700 NA NA NA

Total manufacturing overhead cost $ 488,854

Required:

1. Compute the product margins for the B300 and T500 under the company's traditional costing system.