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	$ 1,770,300
Cost of goods sold	1,245,686
Gross margin	524,614
Selling and administrative expenses	590,000
Net operating loss	$ (65,386 )

Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,600 units of T500 at a price of $40 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	$ 400,600.00	$ 162,400.00	$ 563,000.00
Direct Labor	$ 120,400.00	$ 42,400.00	$ 162,800.00
Manufacturing Overhead			$ 519,886.00
Cost of goods sold			$ 1,245,686.00

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $56,000 and $102,000 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:

	Activity
Activity Cost Pool (and Activity Measure)	Manufacturing Overhead	B300	T500	Total
Machining (machine-hours)	$ 206,856.00	$ 90,000.00	$ 62,100.00	$ 152,100.00
Setups (setup hours)	$ 150,930.00	71	280	351
Product-sustaining (number of products)	$ 101,200.00	1	1	2
Other (organization-sustaining costs)	$ 60,900.00	NA	NA	NA
Total manufacturing overhead cost	$ 519,886.00

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.