Question
Hi-Tek Manufacturing, Incorporated, 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, Incorporated, 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 Incorporated Income Statement | |
Sales | $ 1,701,400 |
---|---|
Cost of goods sold | 1,224,752 |
Gross margin | 476,648 |
Selling and administrative expenses | 560,000 |
Net operating loss | $ (83,352) |
Hi-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $39 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 | $ 400,300 | $ 162,600 | $ 562,900 |
Direct labor | $ 120,000 | $ 42,900 | 162,900 |
Manufacturing overhead | 498,952 | ||
Cost of goods sold | $ 1,224,752 |
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $58,000 and $104,000 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:
Activity Cost Pool (and Activity Measure) | Manufacturing Overhead | Activity | ||
---|---|---|---|---|
B300 | T500 | Total | ||
Machining (machine-hours) | $ 204,752 | 90,100 | 62,700 | 152,800 |
Setups (setup hours) | 132,400 | 71 | 260 | 331 |
Product-sustaining (number of products) | 100,800 | 1 | 1 | 2 |
Other (organization-sustaining costs) | 61,000 | NA | NA | NA |
Total manufacturing overhead cost | $ 498,952 |
Compute the product margins for the B300 and T500 under the companys traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
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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.)
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