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Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,751,700 1,238, 460 513,240 600,000 $ (86,768) Hi-Tek
Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,751,700 1,238, 460 513,240 600,000 $ (86,768) Hi-Tek produced and sold 60,200 units of B300 at a price of $21 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B3ee Tsee Total $ 408,100 $ 162,800 $ 562,100 $ 120,380 $ 42,5ee 162,880 513,560 $ 1,238,460 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC Implementation team concluded that $53,000 and $109.000 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) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Overhead $ 205,20 147,840 100,400 60,380 $ 513,560 Activity B380 T580 Total 90,680 62,480 153.ee 76 260 336 1 1 2. NA NA 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
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