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Chapter Seven Problems (10 pts) Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, L07-4, LO7-5) Hi-Tek Manufacturing, Inc., makes two types of industrial
Chapter Seven Problems (10 pts) Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, L07-4, LO7-5) Hi-Tek Manufacturing, Inc., makes two types of industrial component parts--the 8300 and the 1500. An absorption costing income statement for the most recent period is shown $ Hi-Tek Manufacturing Inc. Income Statement Sales cost of goods sold Gross margin Selling and administrative expenses Net operating less 1,716,000 1,212,566 5e3, 434 560.000 (56,566) $ Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12.800 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 companys two product lines is shown below References 8300 $ 401,000 $ 120,100 1500 162,300 $ 42,600 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 563,300 162,700 486,566 1 1.212.566 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that 553,000 and 5106,000 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 500Total 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 B $ 199,906 125,56 100, 20e 11 456,566 Required: 1. Compute the product margins for the 3300 and 1500 under the company 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 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for the B300 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.) 5.00 1500 T otal Product margin Required 2 >
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