on Assignment i Saved Help Hi-Tek Manufacturing, Incorporated Income Statement Sales $ 2, 100, 000 Cost of goods sold 1, 600, 000 Gross margin 500, 000 Selling and administrative expenses 550, 000 Net operating loss $ (50, 000) Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 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: B300 T500 Total Direct materials $ 436, 300 $ 251, 700 $ 688, 000 Direct labor $ 200, 000 $ 104, 000 304, 000 Manufacturing overhead 608, 000 Cost of goods sold $ 1, 600, 000 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $50,000 and $100,000 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: nces Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 213, 500 90, 000 62, 500 152, 500 Setups (setup hours) 157, 500 75 300 375 Product-sustaining ( number of products) 120, 000 Other (organization-sustaining costs) 117, 000 NA NA NA Total manufacturing overhead cost $ 608, 000 Required: 1. Compute the product margins for 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.