Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the 8300 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 $ 1,708,000 1,246,912 Selling and administrative expenses Net operating loss 461,088 620,000 $ (158,912) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,600 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 B300 T500 $ 400,400 $ 162,200 $ 120,700 $ 42,800 Total $ 562,600 163,500 520,812 $ 1,246,912 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 8300 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) Other (organization-sustaining costs) Product-sustaining (number of products) Total manufacturing overhead cost Required: Manufacturing Overhead B300 $201,432 90,200 157,0801 77 Activity 7500 62,400 280 Total 152,600 357 101,400 1 1 2 60,900 $520,812 NA NA NA 1. Compute the product margins for the 8300 and T500 under the company's traditional costing system. 2. Compute the product margins for 8300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.