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 $ 1,718,000 1,207,090 Selling and administrative expenses Net operating loss 510,910 570,000 $ (59,090) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 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 B300 T500 $ 400,900 $ 162,200 $ 120,200 $ 42,900 Total $ 563,100 163,100 480,890 Cost of goods sold $ 1,207,090 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 $108,000 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) Manufacturing Overhead $ 200,430 118,860 B300 90,200 Activity T500 Total 62,800 153,000 73 210 283 Product-sustaining (number of 101,200 1 1 2 products) Other (organization-sustaining costs) 60,400 Total manufacturing overhead cost $ 480,890 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.