Hi$-$Tek Manufacturing, Incorporated, makes two industrial component parts$$B$300$ and T$500.$ An absorption costing income statement for the most recent period is shown below:

Hi$-$Tek Manufacturing, Incorporated

Income Statement

Sales                                                                        $ $1,708,000$

 

 Cost of goods sold                                                $1,251,241$ 

 

Gross margin $\mathrm{ \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; 4}56,759$

Selling and administrative expenses                 $640,000$

Net operating loss                                                 $ $(183,241)$

Hi$-$Tek produced and sold $60,400$ units of B$300$ at a price of $$20$ per unit and $12,500$ units of T$500$ at a price of $$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:

B$300$ T$500$ Total

Direct materials                                                 $ $400,100$ $ $162,100$ $ $562,200$

Direct labor                                                        $ $120,300$ $ $42,900163,200$

Manufacturing overhead                                 $525,841$

Cost of goods sold                                            $ $1,251,241$

The company created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek$$s ABC implementation team concluded that $$51,000$ and $$102,000$ of the company$$s advertising expenses could be directly traced to B$300$ and T$500,$ 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$)$ Manufacturing Overhead Activity

B$300$ T$500$ Total 

Machining $($machine$-$hours$\mathrm{) \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; }$ $ $210,02190,60062,700153,300$

Setups $($setup hours$)\mathrm{ \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; \; 1}55,32073280353$

Product$-$sustaining $($number of products$\mathrm{) \; \; \; \; \; }100,000112$

 

 Other $($organization$-$sustaining costs$)\mathrm{ \; \; \; \; \; \; \; \; \; \; 6}0,500$  

 

Total manufacturing overhead cost                       $ $525,841$

Required:

Compute the product margins for B$300$ and T$500$ under the company$$s traditional costing system.

Compute the product margins for B$300$ and T$500$ under the activity$-$based costing system.

Prepare a quantitative comparison of the traditional and activity$-$based cost assignments.