Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Incorporated Income Statement Sales Cost of goods sold. Gross margin Selling and administrative expenses Net operating loss $ 1,770,100 1,233,974 536,126 610,000 $ (73,874) Hi-Tek produced and sold 60,100 units of B300 at a price of $21 per unit and 12,700 units of T500 at a price of $40 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold 8300 T500 $ 400,100 $ 162,800 $ 120,500 $ 42,100 Total $562,900 162,600 508,474 $ 1,233,974 5 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $56,000 and $101,000 of the company's 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 company's manufacturing overhead to four activities as shown below. Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $ 205,154 141,120 8300 90,500 Activity T500 Total 62,600 153,100 76 101,400 1 260. 1 336 2 60,800 NA NA $ 508,474 NA aistributed the company's manufacturing overnead to rour activities as snown below: Manufacturing Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Overhead $ 205,154 8300 T500 90,500 62,600 Total 153,100 Setups (setup hours) Product-sustaining (number of products) 141,120 101,400 76 260 336 1 1 2 Other (organization-sustaining costs) 60,800 NA NA NA Total manufacturing overhead cost $ 508,474 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