Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for...

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Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for the most recent period is shown below: Sales Hi-Tek Manufacturing, Incorporated Cost of goods sold Gross margin Income Statement Selling and administrative expenses Net operating loss $ 1,753,800 1,238,668 515,132 630,000 $ (114,868) Hi-Tek produced and sold 60,300 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 B300 $ 400,800 $ 120,700 T500 $ 162,700 $ 42,200 Total $ 563,500 162,900 512,268 $ 1,238,668 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $58,000 and $110,000 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 Required: Manufacturing Overhead $ 200,168 149,600 B300 90,100 Activity T500 62,700 80 260 102,000 1 1 Total 152,800 340 2 60,500 NA $ 512,268 1. Compute the product margins for 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. Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for the most recent period is shown below: Sales Hi-Tek Manufacturing, Incorporated Cost of goods sold Gross margin Income Statement Selling and administrative expenses Net operating loss $ 1,753,800 1,238,668 515,132 630,000 $ (114,868) Hi-Tek produced and sold 60,300 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 B300 $ 400,800 $ 120,700 T500 $ 162,700 $ 42,200 Total $ 563,500 162,900 512,268 $ 1,238,668 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $58,000 and $110,000 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 Required: Manufacturing Overhead $ 200,168 149,600 B300 90,100 Activity T500 62,700 80 260 102,000 1 1 Total 152,800 340 2 60,500 NA $ 512,268 1. Compute the product margins for 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.

Answer rating: 100% (QA)

1 Under the companys traditional costing system Direct materials for B300 400800 Direct labor for B3... View the full answer