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: Sales Hi-Tek Manufacturing Incorporated Cost of goods sold Gross margin Income Statement Selling and administrative expenses Net operating loss $ 1,701,200 1,214,615 486,585 600,000 $ (113,415) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,800 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 $ 400,400 T500 $ 120,600 $ 162,400 $ 42,900 Total $ 562,800 163,500 488,315 S $ 1,214,615 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 $102,000 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 Required: Manufacturing Overhead $ 206,685 120,830 100,000 B300 90,800 Activity T500 Total 62,300 71 210 1 1 153,100 281 2 60,800 NA NA NA $ 488,315 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.