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Hi - Tek Manufacturing, Incorporated, makes two types of industrial component parts the B 3 0 0 and the T 5 0 0 . An
HiTek Manufacturing, Incorporated, makes two types of industrial component partsthe B and the T An absorption costing income statement for the most recent period is shown: HiTek Manufacturing Incorporated Income Statement Sales $ Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ HiTek produced and sold units of B at a price of $ per unit and units of T at a price of $ per unit. The companys 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: B T Total Direct materials $ $ $ Direct labor $ $ Manufacturing overhead Cost of goods sold $ The company has created an activitybased costing system to evaluate the profitability of its products. HiTeks ABC implementation team concluded that $ and $ of the companys advertising expenses could be directly traced to B and T respectively. The remainder of the selling and administrative expenses was organizationsustaining in nature. The ABC team also distributed the companys manufacturing overhead to four activities as shown below: Activity Cost Pool and Activity Measure Manufacturing Overhead Activity B T Total Machining machinehours $ Setups setup hours Productsustaining number of products Other organizationsustaining costs NA NA NA Total manufacturing overhead cost $ Required: Compute the product margins for the B and T under the companys traditional costing system. Compute the product margins for B and T under the activitybased costing system. Prepare a quantitative comparison of the traditional and activitybased cost assignments.
HiTek Manufacturing, Incorporated, makes two types of industrial component partsthe B and the T An absorption costing income statement for the most recent period is shown:
HiTek Manufacturing Incorporated
Income Statement
Sales $
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss $
HiTek produced and sold units of B at a price of $ per unit and units of T at a price of $ per unit. The companys 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:
B T Total
Direct materials $ $ $
Direct labor $ $
Manufacturing overhead
Cost of goods sold $
The company has created an activitybased costing system to evaluate the profitability of its products. HiTeks ABC implementation team concluded that $ and $ of the companys advertising expenses could be directly traced to B and T respectively. The remainder of the selling and administrative expenses was organizationsustaining in nature. The ABC team also distributed the companys manufacturing overhead to four activities as shown below:
Activity Cost Pool and Activity Measure Manufacturing Overhead Activity
B T Total
Machining machinehours $
Setups setup hours
Productsustaining number of products
Other organizationsustaining costs NA NA NA
Total manufacturing overhead cost $
Required:
Compute the product margins for the B and T under the companys traditional costing system.
Compute the product margins for B and T under the activitybased costing system.
Prepare a quantitative comparison of the traditional and activitybased cost assignments.
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