HiTek 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: HiTek Manufacturing Inc. Income Statement Sales 5; 1,268,899 Cost of goods sold 1,238,318 Gross margin 529,682 Selling and administrative expenses 588,896 Net operating loss $ (56,318) HiTek produced and sold 60,000 units of 8300 at a price of $21 per unit and 12,700 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: B388 T568 Total Direct materials $ 499,688 $ 162,888 $ 563,488 Direct labor 3; 123,333 $ 42,333 163,133 Manufacturing overhead 511,818 Cost of goods sold $ 1,238,318 The company has created an activitybased costing system to evaluate the protability of its products. HiTek's ABC implementation team concluded that $56,000 and $100,000 of the company's advertising expenses could be directly traced to 8300 and T500, respectively. The remainder of the selling and administrative expenses was organizationsustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B366 T566 Total Machining (machine-hours) $ 264,618 96J 566 62J 266 152,766 Setups (setup hours) 146,466 76 296 366 Product-sustaining (number at products) 166,466 1 1 2 Other (organizationsustaining costs) 66,466 M M NA Total manufacturing overhead cost $ 511,818 Required: 1. Compute the product margins for the 8300 and T500 under the company's traditional costing system. 2. Compute the product margins for 8300 and T500 under the activitybased costing system. 3. Prepare a quantitative comparison of the traditional and activitybased cost assignments