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 $ 1, 782, 500 Cost of goods sold 1, 212, 381 Gross margin 570, 119 Selling and administrative expenses 640, 000 Net operating loss $ (69, 881) Hi-Tek produced and sold 60,500 units of B300 at a price of $21 per unit and 12,800 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: B300 T500 Total Direct materials $ 400, 800 $ 162, 900 $ 563, 700 Direct labor $ 120, 400 $ 42, 300 162, 700 Manufacturing overhead 485, 981 Cost of goods sold $ 1, 212, 381 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $110,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 203, 091 90, 600 62, 100 152, 700 Setups (setup hours) 122, 590 79 220 299 Product-sustaining (number of products) 100, 200 Other (organization-sustaining costs) 60, 100 NA NA NA Total manufacturing overhead cost $ 485, 981 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.