Hi-Tek Manufacturing Incorporated Income Statement
Sales	$ 1,659,600
Cost of goods sold	1,240,318
Gross margin	419,282
Selling and administrative expenses	590,000
Net operating loss	$ (170,718)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 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	$ 400,400	$ 162,900	$ 563,300
Direct labor	$ 120,500	$ 42,900	163,400
Manufacturing overhead			513,618
Cost of goods sold			$ 1,240,318

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $58,000 and $103,000 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 Cost Pool (and Activity Measure)	Manufacturing Overhead	Activity
		B300	T500	Total
Machining (machine-hours)	$ 210,158	90,600	62,800	153,400
Setups (setup hours)	142,560	74	250	324
Product-sustaining (number of products)	100,800	1	1	2
Other (organization-sustaining costs)	60,100	NA	NA	NA
Total manufacturing overhead cost	$ 513,618

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.