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: Hi-Tek Manufacturing Incorporated Income Statement Sales Cost of goods sold Gross margin $1,761,300 1,215,224 546,076 Selling and administrative expenses. Net operating loss 560,000 $ (13,924) HI-Tek produced and sold 60,100 units of B300 at a price of $21 per unit and 12,800 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. Direct materials Direct labor Manufacturing overhead Cost of goods sold 8300 $ 400,200 $ 120,900 T500 $ 162,800 $ 42,800 Total $ 563,000 163,700 488,524 $ 1,215,224 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $58,000 and $110,000 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 $ 207,944 118,080 101,600 60,900 8300 90,700 Activity 7500 62,200 Total 152,900 78 210 288 1 1 2 NA NA NA $ 488,524 < Prev 4 of 6 Next >