Hi-Tek Manufacturing Incorporated Income Statement Sales $ 1,759,880 Cost of goods sold 1,243, 821 Gross margin 515,979 Selling and administrative expenses 570,000 Net operating loss $ (54,621) Hi-Tek produced and sold 60,400 units of B300 at a price of $21 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: B300 T500 Total Direct materials $ 400, 160 $ 162,900 $ 563,000 Direct labor $ 120, 500 $ 42,300 162, 800 Manufacturing overhead 518,621 Cost of goods sold $ 1,243, 821 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57,000 and $106,000 of the company's advertising expenses could be directly traced to 1300 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 Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 210, 621 90,600 62,700 153,300 Setups (setup hours) 147,000 Product-sustaining (number of products) 100, 800 1 2 Other (organization-sustaining costs) 60,200 NA Total manufacturing overhead cost $ 518,621 280 350 70 1 NA NA 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. Prepare a quantitative comparison of the traditional and activity-based cost assignments