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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 period 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 period is shown: Hi-Tek Manufacturing Incorporated Income Statement Sales $ 1,693,500 Cost of goods sold 1,227,176 Gross margin 466,324 Selling and administrative expenses 640,000 Net operating loss $ (173,676) Hi-Tek produced and sold 60,300 units of 8300 at a price of $20 per unit and 12,500 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: B300 $ 400,300 $ 120,700 1500 $ 162,400 $ 42,200 Direct materials Direct labor Manufacturing overhead Coat of goods sold Total $ 562,700 162,900 501, 576 $1,227,176 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $101,000 of the company's advertising expenses could be directly traced to 1300 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) Setup (setup hours) Productsustaining number of producto) other organization-sustaining costs) Total manufacturing overhead coat Manufacturing Overhead $ 201,036 139,040 101,000 60,500 $ 501,576 1300 90,300 76 1 NA Ativity 1500 62,000 240 1 Total 152,300 316 2 NA NA Required: 1. Compute the product margins for the 8300 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 Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company's traditional costing system. (Round your Intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) B300 T500 Total Product margin Required 1 Required 2 Required 3 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.) B300 T500 Total Product margin 8300 T500 % of % of Total Amount Amount Amount Traditional Cost System Total cost assigned to products Total cost B300 T500 Total Amount % of Total Amount % of Total Amount Amount Amount Activity-Based Costing System Direct costs: Indirect costs: Total cost assigned to products Costs not assigned to products Total cost
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