Sales Hi-Tek Manufacturing Incorporated Cost of goods sold Gross margin Income Statement $ 1,641,000 1,243,788 397,212 Selling and administrative expenses Net operating loss 650,000 $ (252,788) Hi-Tek produced and sold 60,300 units of B300 at a price of $19 per unit and 12,700 units of T500 at a price of $39 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 $ 400,200 $ 120,700 T500 $ 162,300 $ 42,300 Total $ 562,500 163,000 518,288 $ 1,243,788 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $51,000 and $106,000 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: Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Manufacturing Overhead $ 211,558 144,730 Other (organization-sustaining costs) Total manufacturing overhead cost Required: Activity B300 T500 90,100 62,100 Total 152,200 73 280 353 101,400 1 1 2 60,600 $ 518,288 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.