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Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, Lo7-5) Hi-Tek Manufacturing, Inc. makes two types of industrial component parts-the B300 and the
Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, Lo7-5) Hi-Tek Manufacturing, Inc. makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent period is shown: i-Tek Manufacturing Inc Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss s 1,787,280 1,244,296 462,984 658,008 (187,896) a price of $39 per unit. The al cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12.800 units of T500 at lars as the allocation base. Additional information relating to the company's two product lines is shown below 8300T500 s 400,e0 s 120,4e042,eee Total Direct materials Direct labor Manufacturing overhead Cost of goods sold 162,68$562,60 162,488 519, 296 1,244,296 The company has created an activity-based costing system to evaluate the pr team concluded that $59,000 and $103,000 of the company's advertising expenses could ofitability of its products. Hi-Tek's ABC implementation be directly traced to B300 and T500, tively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The A distributed the company's manufacturing overhead to four activities as shown below ManufacturingActivity tivity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) other (organization-sustaining costs) Total manufacturing overhead cost Overhead T508Total s 208,216 98,500 62,600 153,180 359 150,780 180,200 60,100 5 519,296 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 8300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments ducatian.con/ect inl mewoxk Assigneent Required t your antermedate salculations to 2 dech Prepare 3 quantitative camparisen af the traditional and places and "Percantageanswers to 1 decimial place and and sther aremars bo activity-banied east assigmets. (Round latal cost assigeed to
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