Chapter 7 i 5 1 Saved 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 points Sales Cost of goods sold Gross margin eBook Selling and administrative expenses Hint Net operating loss Print References $ 1,699,300 1,257,518 441,782 580,000 $ (138,218) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $39 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 B300 $ 400,800 $ 162,400 $ 120,200 $ 42,100 T500 Total $ 563,200 162,300 532,018 $ 1,257,518 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $59,000 and $108,000 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 $ 209,168 162,450 100,200 60,200 B300 91,000 Activity T500 62,800 71 1 290 1 Total 153,800 361 2 NA NA NA $ 532,018 Help