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HI-Tek Manufacturing, Incorporated, makes two types of Industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent perlod is
HI-Tek Manufacturing, Incorporated, makes two types of Industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent perlod is shown: 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 $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: The company has created an actlivity-based costing system to evaluate the profitability of its products. HI-Tek's ABC Implementation team concluded that $57,000 and $102,000 of the company's advertising expenses could be directly traced to B300 and T500. respectlvely. The remainder of the selling and administrative expenses was organization-sustaining In nature. The ABC team also distrlbuted the company's manufacturing overhead to four actlvitles as shown below. 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 actlvity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments
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