Hi-Tek Manufacturing, Incorporated, makes two types of industrial component partsthe 8300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Incorporated Income statement Sales $ 1,708,000 Cont of goods sold 1.241.345 Gross margin 466,655 Selling and administrative expenses 590,000 Het operating lo. 5 (123, 345) Hi-Tek produced and sold 60,400 units of 8300 at a price of $20 per unit and 12,500 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: 1300 7500 total Direct materiais $ 400,900 $ 162.000 $ 562,900 Direct labor $ 120,100 $ 42,900 163,000 Manufacturing overhead 515, 445 cost of goods sold $1,241,345 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC Implementation team concluded that $59,000 and $107,000 of the company's advertising expenses could be directly traced to 1300 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 Tool (and Activity Measure) Overhead 3300 7500 Total Machining (machine-hours) $ 206,145 90,600 62,100 152,700 Setups setup hours) 147,200 78 290 Product-wontaining number of products) 368 102,000 2 Other (organization-suntaining conto) 60-100 NA NA NA Total manufacturing overhead cost $ 515,445 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. 1 2