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Hi-Tek 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: Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 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: $1,699,400 1,242,354 457,046 620,000 $ (162,954) B300 T500 Total Direct materials $400,200 $162,400 $ 562,600 Direct labor $120,400 $ 43,000 163,400 516,354 $1,242,354 Manufacturing overhead Cost of goods sold 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 $109,000 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) Other (organization-sustaining costs) Total manufacturing overhead cost Activity B300 T500 Total 90,500 62,600 153,100 74 260 334 1 1 2 NA Manufacturing Overhead $ 205,154 150,300 100, 200 60,700 $ 516,354 NA 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) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $205,154 150, 300 100, 200 60,700 $516,354 Activity B300 T500 Total 90,500 62,600 153,100 74 260 334 1 1 2 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.