H-Tek Manufacturing Incorporated, makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent perlod is shown HI-Tek Manufacturing Incorporated Income Statement Sales $ 1,639,100 Cost of goods sold 1,206,364 Gross margin 432,736 Selling and administrative expenses 640,000 Net operating loss $ (207,264) Hi-Tek produced and sold 60,200 units of 8300 at a price of $19 per unit and 12,700 units of T500 at a price of 539 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. 8300 T500 Total Direct sterials $ 400,480 $ 162,800 $ 563,200 Direct labor $ 120,000 $ 42,500 163,300 Manufacturing overhead 479,864 Cost of goods sold $ 2,206,364 The company has created an activity based costing system to evaluate the profitability of its products Hi-Tek's ABC implementation team concluded that 556,000 and $110.000 of the company's advertising expenses could be directly traced to 1300 and 1500, respectively. The remainder or the selling and administrative expenses was organization sustaining in nature. The ABC team also chstributed the company's manufacturing overhead to four actvities as shown below Manufacturing Activity Activity Cost Pool Cond Activity Measure) Overhead Machining machine-hours) 8300 Total $ 205,824 90,700 62,900 153,600 Setups (setup hours) 232,340 200 274 Product Sustaining (unber of products) 100,000 other organization-sustaining costs) 60,200 MA NA Total manufacturing overhead cost 31429,864 Required: 1 Compute the product margins for the 8300 and 1500 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 T500 74 1 1 2