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Hi-Tek Manufacturing, Inc., makes two types of Industrial component partsthe B300 and the T500. An absorption costing Income statement for the most recent period is
Hi-Tek Manufacturing, Inc., makes two types of Industrial component partsthe B300 and the T500. 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 loss $ 1,699, 300 1,243, 12e 456,180 620, eee $ (163,820) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,700 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: B300 $ 400, 700 $ 121, see Direct materials Direct labor Manufacturing overhead Cost of goods sold T500 Total $ 162,700 $ 563, 480 $ 43,00 164, eee 515,720 $ 1,243, 120 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $101,000 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: Manufacturing Overhead $ 202,628 151,200 181,800 60,100 $ 515,720 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 Activity T500 62,600 26e B380 90,900 76 1 NA Total 153,500 336 2 1 NA NA Required: 1. Compute the product margins for the B300 and T500 under the company's 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. 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.) B300 T500 Total Product margin S 0 (Required Required 2 > Required 1 Required 2 Required 3 Compute the product margins for 8300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) Total B300 T500 Product margin $ Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 Total % of % of Amount Amount Amount Traditional Cost System 96 96 96 96 96 Total cost assigned to products s S 0 S 0 Total cost S 0 B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: 96 96 % 96 96 % Indirect costs: %6 % 96 96 % S 0 Total cost assigned to products Costs not assigned to products: Total cost S 0
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