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	$ 1,697,400
Cost of goods sold	1,235,936
Gross margin	461,464
Selling and administrative expenses	620,000
Net operating loss	$ (158,536)

Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,600 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	$ 400,500	$ 162,700	$ 563,200
Direct labor	$ 120,600	$ 42,400	163,000
Manufacturing overhead			509,736
Cost of goods sold			$ 1,235,936

The company created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $54,000 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)	$ 209,336	90,600	62,200	152,800
Setups (setup hours)	139,400	80	260	340
Product-sustaining (number of products)	100,800	1	1	2
Other (organization-sustaining costs)	60,200	NA	NA	NA
Total manufacturing overhead cost	$ 509,736

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.