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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 .
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 produced and sold units of B at a price of $ per unit and units of T at a price of $ 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:
The company has created an activitybased costing system to evaluate the profitability of its products. HiTek's ABC implementation
team concluded that $ and $ of the company's 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 company's manufacturing overhead to four activities as shown below:
Required:
Compute the product margins for the B and T under the company's traditional costing system.
Compute the product margins for and under the activitybased costing system.
Prepare a quantitative comparison of the traditional and activitybased cost assignments.
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