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:

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	1,755,600
Cost of goods sold		1,217,906
Gross margin		537,694
Selling and administrative expenses		590,000
Net operating loss	$	(52,306	)

Hi-Tek produced and sold 60,200 units of B300 at a price of $21per unit and 12,600 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		T500		Total
Direct materials	$	400,600	$	162,800	$	563,400
Direct labor	$	120,500	$	42,600		163,100
Manufacturing overhead						491,406
Cost of goods sold					$	1,217,906

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $56,000 and $101,000 of the company's advertising expenses could be directly traced to B300 andT500, 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:

	Manufacturing Overhead			Activity
Activity Cost Pool (and Activity Measure)				B300	T500	Total
Machining (machine-hours)	$	205,556		90,800	62,600	153,400
Setups (setup hours)		125,050		75	230	305
Product-sustaining (number of products)		100,600		1	1	2
Other (organization-sustaining costs)		60,200		NA	NA	NA
Total manufacturing overhead cost	$	491,406

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.

Complete this question by entering your answers in the tabs below.

• 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 answers to the nearest whole dollar amount.)

	B300	T500	Total
Product margin			$0

Required 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.)

	B300	T500	Total
Product margin			$0

 

Required 3 Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1decimal place and and other answers to the nearest whole dollar amounts.)

	B300			T500			Total
		% of			% of
	Amount			Amount			Amount
Traditional Cost System
			%			%
			%			%
			%			%
Total cost assigned to products	$0			$0			$0
Total cost							$0
	B300			T500			Total
		% of			% of
	Amount	Total Amount		Amount	Total Amount		Amount
Activity-Based Costing System
Direct costs:
			%			%
			%			%
			%			%
Indirect costs:
			%			%
			%			%
			%			%
Total cost assigned to products	$0			$0			0
Costs not assigned to products:
Total cost							$0

Answer rating: 100% (QA)

Solution 1 Predetermined overhead rate Estimated overhead Estimated direct labor cost 493898 162800 ... View the full answer