Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts—the B300 and the T500. An absorption c
Posted: Sun Jul 03, 2022 1:15 pm
Hi-Tek Manufacturing, Incorporated, makes two types ofindustrial component parts—the B300 and the T500. An absorptioncosting income statement for the most recent period is shown:
Hi-Tek produced and sold 60,400 units of B300 at a price of $20per unit and 12,700 units of T500 at a price of $40 per unit. Thecompany’s traditional cost system allocates manufacturing overheadto products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating tothe company’s two product lines is shown below:
The company has created an activity-based costing system toevaluate the profitability of its products. Hi-Tek’s ABCimplementation team concluded that $54,000 and $107,000 of thecompany’s advertising expenses could be directly traced to B300 andT500, respectively. The remainder of the selling and administrativeexpenses was organization-sustaining in nature. The ABC team alsodistributed the company’s manufacturing overhead to four activitiesas shown below:
Required:
Hi-Tek produced and sold 60,400 units of B300 at a price of $20per unit and 12,700 units of T500 at a price of $40 per unit. Thecompany’s traditional cost system allocates manufacturing overheadto products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating tothe company’s two product lines is shown below:
The company has created an activity-based costing system toevaluate the profitability of its products. Hi-Tek’s ABCimplementation team concluded that $54,000 and $107,000 of thecompany’s advertising expenses could be directly traced to B300 andT500, respectively. The remainder of the selling and administrativeexpenses was organization-sustaining in nature. The ABC team alsodistributed the company’s manufacturing overhead to four activitiesas shown below:
Required: