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Hi-Tek Manufacturing, Inc., makes two types of industrialcomponent parts—the B300 and the T500. An absorption costing incomestatement for the most recent period is shown: Hi-Tek ManufacturingInc. Income Statement Sales $ 1,774,100 Cost of goods sold1,232,931 Gross margin 541,169 Selling and administrative expenses640,000 Net operating loss $ (98,831 ) Hi-Tek produced and sold60,100 units of B300 at a price of $21 per unit and 12,800 units ofT500 at a price of $40 per unit. The company’s traditional costsystem allocates manufacturing overhead to products using aplantwide overhead rate and direct labor dollars as the allocationbase. Additional information relating to the company’s two productlines is shown below: B300 T500 Total Direct materials $ 400,100 $163,000 $ 563,100 Direct labor $ 120,400 $ 42,800 163,200Manufacturing overhead 506,631 Cost of goods sold $ 1,232,931 Thecompany has created an activity-based costing system to evaluatethe profitability of its products. Hi-Tek’s ABC implementation teamconcluded that $58,000 and $108,000 of the company’s advertisingexpenses could be directly traced to B300 and T500, respectively.The remainder of the selling and administrative expenses wasorganization-sustaining in nature. The ABC team also distributedthe company’s manufacturing overhead to four activities as shownbelow: Manufacturing Overhead Activity Activity Cost Pool (andActivity Measure) B300 T500 Total Machining (machine-hours) $208,651 90,000 62,300 152,300 Setups (setup hours) 136,080 74 250324 Product-sustaining (number of products) 101,000 1 1 2 Other(organization-sustaining costs) 60,900 NA NA NA Total manufacturingoverhead cost $ 506,631 Required: 1. Compute the product marginsfor the B300 and T500 under the company’s traditional costingsystem. 2. Compute the product margins for B300 and T500 under theactivity-based costing system. 3. Prepare a quantitative comparisonof the traditional and activity-based cost assignments.