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. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,635,200 1,235,699 399,501 640,000 $ (240,499) Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per 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: Direct materials Direct labor B300 T500 $ 400,600 $ 162,500 $ Total 563,100 163,400 Manufacturing overhead Cost of goods sold $ 120,900 $ 42,500 509,199 $1,235,699 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: 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 Manufacturing Overhead B300 Activity T500 90,100 62,800 80 1 280 1 Total 152,900 360 2 60,700 NA NA NA $ 509,199 $ 200,299 147,600 100,600 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. 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 Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,635,200 1,235,699 399,501 640,000 $ (240,499) Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per 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: Direct materials Direct labor B300 T500 $ 400,600 $ 162,500 $ Total 563,100 163,400 Manufacturing overhead Cost of goods sold $ 120,900 $ 42,500 509,199 $1,235,699 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: 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 Manufacturing Overhead B300 Activity T500 90,100 62,800 80 1 280 1 Total 152,900 360 2 60,700 NA NA NA $ 509,199 $ 200,299 147,600 100,600 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.
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Managerial Accounting for Managers
ISBN: 978-1259578540
4th edition
Authors: Eric Noreen, Peter Brewer, Ray Garrison
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