Hi-Tek Manufacturing, Incorporated, makes two industrial component partsB300 and T500. An absorption costing income statement for the most recent period is shown below:

Hi-Tek Manufacturing, Incorporated
Income Statement
Sales	$ 1,762,100
Cost of goods sold	1,231,536
Gross margin	530,564
Selling and administrative expenses	580,000
Net operating loss	$ (49,436)

Hi-Tek produced and sold 60,100 units of B300 at a price of $21 per unit and 12,500 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	$ 400,500	$ 162,900	$ 563,400
Direct labor	$ 120,200	$ 42,400	162,600
Manufacturing overhead			505,536
Cost of goods sold			$ 1,231,536

The company created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $100,000 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)	$ 210,036	90,100	62,100	152,200
Setups (setup hours)	134,800	77	260	337
Product-sustaining (number of products)	100,200	1	1	2
Other (organization-sustaining costs)	60,500	NA	NA	NA
Total manufacturing overhead cost	$ 505,536

Required:

1. Compute the product margins for 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.