Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

8300 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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
8300 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 $ 1,788,600 Cost of goods sold 1,238,630 Gross margin 469,970 Selling and adninistrative expenses 570,000 Net operating loss $ (100,030) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,700 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: T500 Total Direct materials $ 400,700 $ 162,800 $ 563,500 Direct labor $ 120,000 $ 42,900 162,900 Manufacturing overhead 511,630 Cost of goods sold $ 1,238,030 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57000 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: Manufacturing Activity Activity Cost Pool (and activity Measure) Overhead 3300 T500 Total Machining (nachine-hours) $ 207,360 90,800 62,800 153,600 Setups (setup hours) 142,270 77 270 347 Product-sustaining (number of products) 101,600 Other (organization-sustaining costs) 60,400 NA NA Total manufacturing overhead cost $ 511,630 1 1 2 NA The company has created an activity based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57000 and $109,000 of the company's advertising expenses could be directly traced to 1300 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 Activity Cost Pool (and Activity Measure) Activity Overhead 8300 T500 Total Machining (nachine-hours) $ 207,360 Setups (setup hours) 90,880 62,800 153,600 142,270 77 270 347 Product-sustaining (number of products) 101,600 1 1 Other (organization-sustaining costs) 60,400 NA Total manufacturing overhead cost $ 511,630 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. 2 NA NA Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for the 8300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) 8300 T500 Total Product margin 302.500 167,594 $ 470,094 Required 2 > distributed the company's manufacturing overhead to four activities as shown below: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 207,360 90,800 62,880 153,600 Setups (setup hours) 142,270 270 347 Product-sustaining (number of products) 101,680 1 Other (organization-sustaining costs) 60,400 NA NA Total manufacturing overhead cost $ 511,630 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. 77 1 NA 2 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) B300 T500 Total Product margin 474,350 56,020 $530,370 Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 % of % of Total Amount Amount Amount $ 44.6 Traditional Cost System Direct materials Direct labor Manufacturing overhead Total cost assigned to products Other Total cost 400,700 120,000 376,800 897.500 $ 13.4 420$ $ 162.800 42,900 134,706 340,406 $ 47.8 3$ 563,500 12.63 162,900 39.63 511,506 $ 1.237,906 570,000 $ 1.807,906 > B300 T500 % of Total Amount % of Total Amount Amount Amount Total Amount S 563,500 Activity-Based Costing System Direct costs Direct materials Direct labor Advertising expense Indirect costs Machining 400,700 120,000 57.000 51.23 15 3 3 73 162,800 42,900 109,000 29.03 $ 7.6 19.4 162,900 166,000 122,580 15.7 84.780 15.13 207,360 $ > 0 Direct materials Direct labor Manufacturing overhead Total cost assigned to products Other Total cost 400,700 120,000 376,800 897.500 44.6 S 13.4 % 42.0 $ 162,800 42,900 134,706 340,406 47.8 X $ 12.6 x 39.6 X $ X 563,500 162,900 511,506 1,237,906 570,000 1,807,906 $ x $ B300 T500 Total Amount % of Total Amount % of Total Amount Amount Amount Activity-Based Costing System Direct costs: Direct materials IS 51.2 $ 29.0 400,700 120,000 162,800 42,900 15.3 7.6 x S 563,500 162,900 166,000 57,000 7.3 % 109,000 19.4 15.7 % > 15.1 x 4.0 Direct labor Advertising expense Indirect costs Machining Setups Product sustaining Total cost assigned to products Costs not assigned to products: Other Selling and administrativo Total cost 122,580 31,570 50,800 782,650 19.7 X 84.780 110,700 50,800 560,980 6.5 x 207,360 142,270 101,600 1,343,630 9.1 x $ $ 0 0 0 0 > 0 0 > 0 0 60,400 404,000 1,808,030 $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial & Managerial Accounting For Undergraduates

Authors: Jason Wallace, James Nelson, Karen Christensen, Theodore Hobson, Scott L. Matthews

2nd Edition

161853310X, 9781618533104

More Books

Students also viewed these Accounting questions

Question

Explain possible uses for single-case research.

Answered: 1 week ago