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 $ 1,767,600 1,223,118 544,482 600,000 (55,518) 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 $21 per unit and 12,800 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: T500 $ 400, 300 $ 162,700 $ $ 120,500 $ 42,300 B300 Total Direct materials 563,000 162,800 497,318 S 1,223,118 Direct labor 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 $53,000 and $108,000 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 T500 Manufacturing B300 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead Total $ 204,618 90,500 62,200 80 152,700 320 131,200 101,400 60,100 $ 497,318 240 1 NA NA NA 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.