StanTech Manufacturing, Inc., makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent period is shown: StanTech Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 2,100,000 1,600,000 500,000 550,000 $ (50,000) StanTech 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 Direct labor $ 436,300 $ 251,700 $ $ 200,000 $ 104,000 688,000 304,000 Manufacturing overhead 608,000 Cost of goods sold $ 1,600,000 The company has created an activity-based costing system to evaluate the profitability of its products. StanTech'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: Manufacturing Overhead Activity B300 T500 Total 213,500 90,000 62,500 152,500 157,500 75 300 375 120,000 1 1 2 117,000 NA $ 608,000 Activity Cost Pool (and Activity Measure) Machining (machine-hours) $ Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Required: 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. Please give brief explanations why the traditional and activity-based cost assignments are different