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CoursHeroTranscribedText: Item 1 Hi-Tek Manufacturing. Inc.. makes two types of industrial component partsthe E300 and the T500. An absorption costing income statement forthe most recent period is shown: Hi-Tek Manufacturing Inc. Income Statement Sales 51371400 Cost of goods sold 1.252.448 Gross margin 519.952 Selling and administrative expenses 560,000 Net operating loss 5(40.048 jI Hi-Tek produced and sold 60.400 units of 8300 at a price of 521 per unit and 12,600 units of T500 at a price of 540 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: BBOOTSOO Total Direct materials 5 400.9005 1628005563300 Direct labor 5 120.100 5 42.?00 162.800 Manufacturing overhead 525.948 Cost of goods sold 51.252.448 The company has created an activitybased costing system to evaluate the protability of its products. Hi- Tek's ABC implementation team concluded that 554.000 and $102,000 of the company's advertising expenses could be directly traced to 8300 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: ManufacturingActivity Overhead Activity Cost Pool [and Activity Measure) B300 T500 Total Machining [machine-hours} 5 209.898 90.00062.100152.100 Setups [setup hours] 154.350 T3 2?0 343 Productsustaining [number of products} 101.400 1 1 2 Other [organization-sustaining costs} 60.300 NA NA NA Total manufacturing overhead cost 5 525.948 Required: 1. Compute the product margins for the B300 and T500 under the company's traditional costing system. 2. Compute the product margins for 8300 and T500 under the activitybased costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments