Answered step by step
Verified Expert Solution
Link Copied!

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 below:

Hi-Tek Manufacturing Inc. Income Statement
Sales $ 1,659,600
Cost of goods sold 1,253,020
Gross margin 406,580
Selling and administrative expenses 570,000
Net operating loss $ (163,420)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

B300 T500 Total
Direct materials $ 401,000 $ 162,200 $ 563,200
Direct labor $ 120,400 $ 42,300 162,700
Manufacturing overhead 527,120
Cost of goods sold $ 1,253,020

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $103,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

Manufacturing Activity
Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total
Machining (machine-hours) $ 214,200 90,500 62,500 153,000
Setups (setup hours) 151,620 71 290 361
Product-sustaining (number of products) 100,600 1 1 2
Other (organization-sustaining costs) 60,700 NA NA NA
Total manufacturing overhead cost $ 527,120

Required

1. Compute the product margins for the B300 and T500 under the companys traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)

2. Compute the product margins for B300 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.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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 below:

Hi-Tek Manufacturing Inc. Income Statement
Sales $ 1,659,600
Cost of goods sold 1,253,020
Gross margin 406,580
Selling and administrative expenses 570,000
Net operating loss $ (163,420)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

B300 T500 Total
Direct materials $ 401,000 $ 162,200 $ 563,200
Direct labor $ 120,400 $ 42,300 162,700
Manufacturing overhead 527,120
Cost of goods sold $ 1,253,020

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $103,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

Manufacturing Activity
Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total
Machining (machine-hours) $ 214,200 90,500 62,500 153,000
Setups (setup hours) 151,620 71 290 361
Product-sustaining (number of products) 100,600 1 1 2
Other (organization-sustaining costs) 60,700 NA NA NA
Total manufacturing overhead cost $ 527,120

Required

1. Compute the product margins for the B300 and T500 under the companys traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)

2. Compute the product margins for B300 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.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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 below:

Hi-Tek Manufacturing Inc. Income Statement
Sales $ 1,659,600
Cost of goods sold 1,253,020
Gross margin 406,580
Selling and administrative expenses 570,000
Net operating loss $ (163,420)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

B300 T500 Total
Direct materials $ 401,000 $ 162,200 $ 563,200
Direct labor $ 120,400 $ 42,300 162,700
Manufacturing overhead 527,120
Cost of goods sold $ 1,253,020

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $103,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

Manufacturing Activity
Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total
Machining (machine-hours) $ 214,200 90,500 62,500 153,000
Setups (setup hours) 151,620 71 290 361
Product-sustaining (number of products) 100,600 1 1 2
Other (organization-sustaining costs) 60,700 NA NA NA
Total manufacturing overhead cost $ 527,120

Required

1. Compute the product margins for the B300 and T500 under the companys traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)

2. Compute the product margins for B300 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.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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 below:

Hi-Tek Manufacturing Inc. Income Statement
Sales $ 1,659,600
Cost of goods sold 1,253,020
Gross margin 406,580
Selling and administrative expenses 570,000
Net operating loss $ (163,420)

Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:

B300 T500 Total
Direct materials $ 401,000 $ 162,200 $ 563,200
Direct labor $ 120,400 $ 42,300 162,700
Manufacturing overhead 527,120
Cost of goods sold $ 1,253,020

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $103,000 of the companys 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 companys manufacturing overhead to four activities as shown below:

Manufacturing Activity
Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total
Machining (machine-hours) $ 214,200 90,500 62,500 153,000
Setups (setup hours) 151,620 71 290 361
Product-sustaining (number of products) 100,600 1 1 2
Other (organization-sustaining costs) 60,700 NA NA NA
Total manufacturing overhead cost $ 527,120

Required

1. Compute the product margins for the B300 and T500 under the companys traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)

2. Compute the product margins for B300 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.)

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Security And Auditing Of Smart Devices

Authors: Sajay Rai, Philip Chukwuma, Richard Cozart

1st Edition

0367567997, 978-0367567996

More Books

Students also viewed these Accounting questions

Question

11. Identify the stage of beyond duality in Gone With the Wind.

Answered: 1 week ago

Question

Compose the six common types of social business messages.

Answered: 1 week ago

Question

Describe positive and neutral messages.

Answered: 1 week ago