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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 $ 1,643,800 1, 208, 635 435, 165 640,000 $ (204,835) * Hi-Tek produced and sold 60,200 units of B300 at a price of $19 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 materialsDirect laborManufacturing overheadCost of goods sold B300 $ 400,800 $ 120,900 T500 $ 162,400 $ 42,900 Total $ 563,200 163,800 481,635 $ 1,208,635 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 Manufacturing Overhead $ 199,775 121, 360 100,000 60,500 $ 481,635 B300 90,200 76 1 NA Activity T500 62,300 220 1 NA Total 152,500 296 2 NA Required: Compute the product margins for the B300 and T500 under the company's traditional costing system. Compute the product margins for B300 and T500 under the activity-based costing system. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

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