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	$	1,629,400
Cost of goods sold		1,240,468
Gross margin		388,932
Selling and administrative expenses		650,000
Net operating loss	$	(261,068	)

Hi-Tek produced and sold 60,100 units of B300 at a price of $19 per unit and 12,500 units of T500 at a price of $39 per unit. The companys 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 companys two product lines is shown below:

	B300		T500		Total
Direct materials	$	400,700	$	162,200	$	562,900
Direct labor	$	120,400	$	42,200		162,600
Manufacturing overhead						514,968
Cost of goods sold					$	1,240,468

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $105,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

	Manufacturing Overhead			Activity
Activity Cost Pool (and Activity Measure)				B300	T500	Total
Machining (machine-hours)	$	201,828		90,200	62,700	152,900
Setups (setup hours)		152,240		76	270	346
Product-sustaining (number of products)		100,600		1	1	2
Other (organization-sustaining costs)		60,300		NA	NA	NA
Total manufacturing overhead cost	$	514,968

Required:

1. Compute the product margins for the B300 and T500 under the companys 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.