Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and the T500. An absorption...
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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 below: Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,769,700 1,217,874 Direct materials Direct labor Manufacturing overhead Cost of goods sold 551,826 590,000 $ (38,174) Hi-Tek produced and sold 60,500 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: B300 $ 400,200 $ 120,400 Total 562,600 162,900 492,374 $ 1,217,874 T500 $ 162,400 $ $ 42,500 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 $103,000 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 Product margin B300 Manufacturing Overhead $ 200,954 130,720 100,400 60,300 $ 492,374 T500 $ Activity 69 B300 90,700 Total Required 1. 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 answer to the nearest whole dollars.) 74 1 ΝΑ 0 T500 Total 62.700 153,400 230 1 ΝΑ 304 2 ΝΑ 2. 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.) 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (í.e. .1234 should be entered as 12.3) and other answers to nearest whole dollar amounts.) Traditional Cost System Direct materials Direct labor Manufacturing overhead Total cost assigned to products Selling and administrative Total cost $ Amount B300 % of Total Amount 69 Amount T500 0 % of Total Amount $ Total Amount 0 0 Activity-Based Costing System Direct costs: Direct materials Direct labor Advertising expense Indirect costs: Machining Setups Product sustaining Total cost assigned to products Costs not assigned to products: Selling and administrative Total cost $ Amount B300 0 % of Total Amount Amount T500 0 % of Total Amount $ Total Amount 0 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 below: Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,769,700 1,217,874 Direct materials Direct labor Manufacturing overhead Cost of goods sold 551,826 590,000 $ (38,174) Hi-Tek produced and sold 60,500 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: B300 $ 400,200 $ 120,400 Total 562,600 162,900 492,374 $ 1,217,874 T500 $ 162,400 $ $ 42,500 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 $103,000 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 Product margin B300 Manufacturing Overhead $ 200,954 130,720 100,400 60,300 $ 492,374 T500 $ Activity 69 B300 90,700 Total Required 1. 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 answer to the nearest whole dollars.) 74 1 ΝΑ 0 T500 Total 62.700 153,400 230 1 ΝΑ 304 2 ΝΑ 2. 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.) 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (í.e. .1234 should be entered as 12.3) and other answers to nearest whole dollar amounts.) Traditional Cost System Direct materials Direct labor Manufacturing overhead Total cost assigned to products Selling and administrative Total cost $ Amount B300 % of Total Amount 69 Amount T500 0 % of Total Amount $ Total Amount 0 0 Activity-Based Costing System Direct costs: Direct materials Direct labor Advertising expense Indirect costs: Machining Setups Product sustaining Total cost assigned to products Costs not assigned to products: Selling and administrative Total cost $ Amount B300 0 % of Total Amount Amount T500 0 % of Total Amount $ Total Amount 0
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Related Book For
Managerial Accounting for Managers
ISBN: 978-1259578540
4th edition
Authors: Eric Noreen, Peter Brewer, Ray Garrison
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