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 StatementSales$1,637,100Cost of goods sold1,243,160Gross margin393,940Selling and administrative expenses570,000Net operating loss$(176,060)

Hi-Tek produced and sold 60,300 units of B300 at a price of $19 per unit and 12,600 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:

B300T500TotalDirect materials$400,700$162,600$563,300Direct labor$120,900$42,400163,300Manufacturing overhead516,560Cost of goods sold$1,243,160

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 $105,000 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

OverheadActivityActivity Cost Pool (and Activity Measure)B300T500TotalMachining (machine-hours)$209,61090,80062,200153,000Setups (setup hours)145,35073250323Product-sustaining (number of products)101,400112Other (organization-sustaining costs)60,200NANANATotal manufacturing overhead cost$516,560

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. quantitative comparison of the traditional and activity-based cost assignments.