Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 period

image text in transcribed

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 period is shown: Sales Hi-Tek Manufacturing Incorporated Income Statement Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,712,000 1,238,504 473,496 630,000 $ (156,504) Hi-Tek produced and sold 60,200 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 $ 400,400 $ 120,500 T500 $ 162,700 $ 42,600 Total $ 563,100 163,100 512,304 $ 1,238,504 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $60,000 and $103,000 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 Required: Manufacturing Overhead $ 209,884 139,920 101,600 B300 90,500 Activity T500 62,700 78 240 1 1 Total 153,200 318 2 60,900 NA NA NA $ 512,304 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.

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

Financial Accounting

Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper

1st Canadian Edition

9780132147538, 132889714, 013214753X , 978-0132889711

More Books

Students also viewed these Accounting questions

Question

difference between tax planning and tax management

Answered: 1 week ago