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 $ 1,762,100 Cost of goods sold 1,243,116 Gross margin 518,984 Selling and administrative expenses 570,000 Net operating loss $ (51,016) Hi-Tek produced and sold 60,100 units of B300 at a price of $21 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 $ 401,000 $ 162,700 $ 563,700 Direct labor $ 120,900 $ 43,000 163,900 Manufacturing overhead 515,516 Cost of goods sold $ 1,243,116 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $57,000 and $110,000 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) $ 208,216 90,200 62,900 153,100 Setups (setup hours) 145,600 74 290 364 Product-sustaining (number of products) 100,800 1 1 2 Other (organization-sustaining costs) 60,900 NA NA NA Total manufacturing overhead cost $ 515,516 Required: Compute the product margins for the B300 and T500 under the companys traditional costing system. Compute the product margins for B300 and T500 under the activity-based costing system. Prepare a quantitative comparison of the traditional and activity-based cost assignments.