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: Hi-Tek Manufacturing Inc. Incone Statement $ 1,709,200 1,248,040 461,160 Sales Cost of goods sold Gross nargin Selling and adninistrative expenses Net operating loss 580,000 $ (118,840) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 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: 8300 $ 400, 100 S 162,600 $ $ 120,400 S 42,400 Total 562, 700 162,800 522,540 $ 1,248,00 T500 Direct materials Direct labor Hanufacturing overhead Cost of goods sold 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 $109,000 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. Hanufactur Overhend $214,760 146,780 100, 400 64,600 Activity T500 90,900 62,5s00 200 Total 153,400 358 Activity Cost Pool (and Activity Measure) Machining (nachine-hours) Setups (setup hours) Product-sustaining (nunber of products) Other (organization-sustaining costs) Total manufacturing overhead cost 0.300 NA NA NA $$22,540 Required: 1. Compute the product margins for the B300 and T500 under the company's tracitional costing system. 2. Compute the product margins for B300 and T500 under the activity-based costing system 3. Prepare a quantitative comparison of the traditional and activity based cost assignments. Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Inc. Incone Statement $ 1,709,200 1,248,040 461,160 Sales Cost of goods sold Gross nargin Selling and adninistrative expenses Net operating loss 580,000 $ (118,840) Hi-Tek produced and sold 60,500 units of B300 at a price of $20 per unit and 12,800 units of T500 at a price of $39 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: 8300 $ 400, 100 S 162,600 $ $ 120,400 S 42,400 Total 562, 700 162,800 522,540 $ 1,248,00 T500 Direct materials Direct labor Hanufacturing overhead Cost of goods sold The company has created an activity-based costing system to evaluate the profitability of its products. HI-Tek's ABC Implementation team concluded that $56,000 and $109,000 of the company's advertising expenses could be directly traced to B300 and T500. respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below. Hanufactur Overhend $214,760 146,780 100, 400 64,600 Activity T500 90,900 62,5s00 200 Total 153,400 358 Activity Cost Pool (and Activity Measure) Machining (nachine-hours) Setups (setup hours) Product-sustaining (nunber of products) Other (organization-sustaining costs) Total manufacturing overhead cost 0.300 NA NA NA $$22,540 Required: 1. Compute the product margins for the B300 and T500 under the company's tracitional 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.
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Managerial Accounting for Managers
ISBN: 978-1259578540
4th edition
Authors: Eric Noreen, Peter Brewer, Ray Garrison
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