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Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating los:s 1,703,200 1,226,684 476,516 580,000 $(103,484) Hi-Tek
Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating los:s 1,703,200 1,226,684 476,516 580,000 $(103,484) 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 $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 8300 T500 Total Direct materials Direct labor Manufacturing overhead Cost of goods sold s 400,900 162,300 563,200 163,000 500,484 $1,226, 684 120,20e42,800 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $60,000 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 Activit T500 Manufacturing 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 Total Overhead 210,864 128,520 100,400 60,700 $500,484 90,400 62,400 152,800 230 76 306 NA NA NA Required: 1. Compute the product margins for the B300 and T500 under the company's traditional costing systenm 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
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