Hi-Tek Manufacturing, Incorporated, 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 Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,300 units of B300 at a price of $21 per unit and 12,500 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold $ 1,766,300 1,236,304 529,996 580,000 $ (50,004) B300 T500 $ 400,000 $ 162,900 $ 120,600 $ 42,800 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 Total $ 562,900 163,400 510,004 $ 1,236,304 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 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 $ 205,824 141,680 101,800 60,700 $ 510,004 B300 91,000 72 1 ΝΑ Activity T500 62,600 250 1 ΝΑ Total 153,600 322 2 NA 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.