Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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 $ 1,714,000 1,244,930 469,070 620,000 $ (150,930) Hi-Tek produced and sold 60,300 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 $ 400,000 $ 120, 300 T500 $ 162,800 $ 42,100 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,800 162,400 519,730 $ 1,244,930 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $51,000 and $106,000 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 $ 200,430 157,500 101,000 60,800 $ 519,730 B300 90,400 80 1 NA Activity T500 62,600 270 1 NA Total 153,000 350 2 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. age nswers LO place answers to B300 T500 Total % of % of Amount Amount Amount Traditional Cost System % % % % % % Total cost assigned to products 0 $ 0 $ 0 Total cost $ 0 Total B300 % of Total Amount T500 % of Total Amount Amount Amount Amount Activity-Based Costing System Direct costs: % % % Indirect costs: % % % $ 0 $ 0 0 Total cost assigned to products Costs not assigned to products: Total cost $ 0
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started