DO NOT COPY FROM CHEGG

I have attached the question and the answer. I need to know how the manufacturing overhead is calculated.

Please show me the calculation of Manufacturing overhead:

Manufacturing overhead

400,000

208,000

DO NOT COPY FROM CHEGG. Otherwise I will report.

Questions:

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	$2,100,000
Cost of goods sold	1,600,000
Gross margin	500,000
Selling and administrative expenses	550,000
Net operating loss	$(50,000)

Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 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 to the company's two product lines is shown below:

	B300	T500	Total
Direct materials	$436,300	$251,700	$688,000
Direct labor	$200,000	$104,000	304,000
Manufacturing overhead			608,000
Cost of goods sold			$1,600,000

The company has created an activity-based costing system to evaluate the profitability of its products. Hi- Tek's ABC implementation team concluded that $50,000 and $100,000 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
Activity Cost Pool (and Activity Measure)	Manufacturing Overhead	B300	T500	Total
Machining (machine-hours)	$213,500	90,000	62,500	152,500
Setups (setup hours)	157,500	75	300	375
Product-sustaining (number of products)	120,000	1	1	2
Other (organization-sustaining costs)	117,000	NA	NA	NA
Total manufacturing overhead cost	$608,000

1. Compute the product margins for the B300 and T500 under the company's traditional costing system.

DO NOT COPY FROM CHEGG. Otherwise I will report.

Answer

1.

Product margin under the traditional costing system is calculated as follow:

	Particulars	Total		Per unit
		B300	T500	B300	T500
	No. of units sold	70,000	17,500	70,000	17,500
	Sales	1,400,000	700,000	20	40
	Cost of goods sold
Less:	Direct material	436,300	251,700	6.23	14.38
Less:	Direct labor	200,000	104,000	2.86	5.94
Less:	Manufacturing overhead	400,000	208,000	5.71	11.89
	Product margin	363,700	136,300	5.20	7.79

Product Margin % (B300) = $5.20/$20 = 26.0%

Product Margin % (T500) = $7.79/$40 = 19.5%

DO NOT COPY FROM CHEGG. Otherwise I will report.