Hi-Tek Manufacturing, Incorporated, makes two types of industrial component partsthe B300 and the T500. An absorption costing income statement for the most recent period is shown:

Hi-Tek Manufacturing Incorporated Income Statement
Sales	$ 1,647,600
Cost of goods sold	1,246,615
Gross margin	400,985
Selling and administrative expenses	620,000
Net operating loss	$ (219,015)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 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	$ 400,700	$ 162,400	$ 563,100
Direct labor	$ 120,500	$ 42,600	163,100
Manufacturing overhead			520,415
Cost of goods sold			$ 1,246,615

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $58,000 and $102,000 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)	$ 211,975	90,400	62,100	152,500
Setups (setup hours)	145,740	77	270	347
Product-sustaining (number of products)	102,000	1	1	2
Other (organization-sustaining costs)	60,700	NA	NA	NA
Total manufacturing overhead cost	$ 520,415

Required:

1. Compute the product margins for the 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.