- Hi Tek Manufacturing Incorporated Makes Two Types Of Industrial Component Parts The B300 And The T500 An Absorption C 1 (178.31 KiB) Viewed 50 times
Hi-Tek Manufacturing, Incorporated, 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 Incorporated Income
Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,600 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: Direct materials. Direct labor Manufacturing overhead Cost of goods sold $ 1,710,000 1,227,177 482,823 610,000 $ (127,177) B300 $ 400,200 $ 120,400 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 T500 $ 162,000 $ 42,400 The
company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $58,000 and $104,000 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: Total $ 562,200 162,800 502,177 $ 1,227,177 Manufacturing Overhead $ 200,037 139,440 101,800 60,900 $ 502,177 B300 90,300 72 1 ΝΑ Activity T500 62,400 260 1 ΝΑ Total 152,700 332 2 ΝΑ 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.
Required 1 Required 2 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 1 decimal place and and other answers to the nearest whole dollar amounts.) Traditional Cost System Total cost assigned to products Total cost Activity-Based Costing System Direct costs: Indirect costs: Total cost assigned to products Costs not assigned to products: Total cost $ $ Amount Amount B300 0 B300 0 % of % of Total Amount $ $ Amount Amount T500 0 T500 0 % of % of Total Amount Total Amount $ $ Total Amount $ 0 0 0 0