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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 1,716,000 1,236,176 479,824 600,000 (120,176) $ Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,700 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: B300 $ 400,800 $ 120,900 T500 $ 162,500 $ 42,200 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 563,300 163,100 509,776 $ 1,236,176 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 $ 201,696 146,580 100,600 60,900 $ 509,776 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 B300 1500 90,400 62,400 270 1 1 NA NA Total 152,800 349 79 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Complete this question by entering your answers in the tabs below. 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.) T500 Total B300 I % of % of Amount Amount Amount Traditional Cost System Total cost assigned to products Total cost T Total B300 % of Amount Total Amount 500 % of Total Amount Amount Amount Activity-Based Costing System Direct costs: Indirect costs: Total cost assigned to products Costs not assigned to products: Total cost
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