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HI-Tek Manufacturing, Inc., makes two types of Industrial component parts-the B300 and the T500. An absorption costing Income statement for the most recent period
HI-Tek Manufacturing, Inc., makes two types of Industrial component parts-the B300 and the T500. An absorption costing Income statement for the most recent period is shown: Sales Hi-Tek Manufacturing Inc. Income Statement Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,647,800 1,224,720 423,080 560,000 $ (136,920) HI-Tek produced and sold 60,200 units of B300 at a price of $19 per unit and 12,600 units of T500 at a price of $40 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 1500 Direct materials Direct labor Manufacturing overhead. Cost of goods sold $ 400,900 $ 163,000 $ $ 120,300 $ 42,100 Total 563,900 162,400 498,420 $ 1,224,720 The company has created an activity-based costing system to evaluate the profitability of its products. HI-Tek's ABC Implementation team concluded that $54,000 and $109,000 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: 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 Manufacturing Overhead $ 204,350 132,870 8300 90,400 Activity T500 Total 62,100 79 230 100,600 1 1 152,500 309 2 60,600 NA NA NA $ 498,420 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. Complete this question by entering your answers in the tabs below. 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 Product margin T500 Total
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