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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 $ 1,643,800 Cost of goods sold 1,237, 320 Gross margin 406, 480 Selling and administrative expenses 580,000 Net operating loss $ (173,520) Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per unit and 12,500 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 the company's two product lines is shown below: B300 $ 400,400 $ 120,500 T500 $ 162,400 $ 42,800 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 562,800 163,300 511, 220 $ 1,237, 320 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 $102,000 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 Manufacturing Overhead $ 203,490 146,630 100,200 60,900 $ 511,220 B300 90,500 71 1 NA Activity T500 62,500 270 1 NA Total 153,000 341 2 NA 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 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 $ 0 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 $ 0 Required 1 Required 2 Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 % of % of Total Amount Amount Amount Traditional Cost System Total cost assigned to products $ 0 $ 0 $ 0 Total cost $ 0 B300 T500 Total Amount % of Total Amount % of Total Amount Amount Amount Activity-Based Costing System Direct costs: Indirect costs: Indirect costs: $ 0 $ 0 0 Total cost assigned to products Costs not assigned to products: Total cost $ 0
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