Question
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 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:
Prepare a quantitative comparison of the traditional and activitybased cost assignments note answers in picture are correct for questionRequired
Required
Amount Traditional Cost System Direct labor $ 120,500 Direct materials 400,800 Manufacturing overhead Total cost assigned to products Selling and administrative Total cost Activity-Based Costing System Direct costs: Direct labor Direct materials Indirect costs: % of % of Total Amount Amount $ 42,400 162,200 511,140 521,300 $ 204,600 $ 511,140 511,140 B300 T500 % of % of Total Amount Amount Total Amount Amount Total Amount $ 120,500 $ 42,400 400,800 162,200 Machining Product sustaining Setups Total cost assigned to products $ 521,300 $ 204,600 Costs not assigned to products: Selling and administrative Other Total cost < Required 2 Required 3 > 0 $ 0
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