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 incomestatement for the most recent period is shown:Hi-Tek Manufacturing Inc.Income StatementSalesCost of goods soldGross marginSelling and administrative expenses$ 1,657,5001,224,620432,880620,000Net operating loss$ (187,120)Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,700 units of T500 at a price of $40 per unit. Thecompany's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating to the company's two product lines is shown below:в300T500Total$ 400,600$ 120,400Direct materials$ 162,700$ 42,000563,300162,400498,920Direct laborManufacturing overheadCost of goods sold$ 1,224,620The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementationteam concluded that $55,000 and $101,000 of the company's advertising expenses could be directly traced to B300 and T500,respectively. Thb remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team alsodistributed the company's manufacturing overhead to four activities as shown below:ManufacturingActivityOverheadB300T500TotalActivity Cost Pool (and Activity Measure)Machining (machine-hours)Setups (setup hours)Product-sustaining (number of products)Other (organization-sustaining costs)90,100 62,30076152,400306$ 205,740131,580101,60060,0002301.NANANATotal manufacturing overhead cost$ 498,920Required:%24 places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.)B300T500Total% of% ofAmountAmountAmountTraditional Cost SystemTotal cost assigned to products2$Total costB300T500Total% of% ofAmountTotal AmountAmountTotal AmountAmountActivity-Based Costing SystemDirect costs:Indirect costs:Total cost assigned to products240.0.Costs not assigned to products:%24%24%24%24%%一%%24

Traditional costing system: It is a method of allocation of overhead to the products. Under this…

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.

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

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
$ 1,657,500
1,224,620
432,880
620,000
Net operating loss
$ (187,120)
Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,700 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:
в300
T500
Total
$ 400,600
$ 120,400
Direct materials
$ 162,700
$ 42,000
563,300
162,400
498,920
Direct labor
Manufacturing overhead
Cost of goods sold
$ 1,224,620
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation
team concluded that $55,000 and $101,000 of the company's advertising expenses could be directly traced to B300 and T500,
respectively. Thb 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
Activity
Overhead
B300
T500
Total
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Other (organization-sustaining costs)
90,100 62,300
76
152,400
306
$ 205,740
131,580
101,600
60,000
230
1.
NA
NA
NA
Total manufacturing overhead cost
$ 498,920
Required:
%24

places and "Percentage" answers to 1 decimal 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
2$
Total cost
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
24
0.
0.
Costs not assigned to products:
%24
%24
%24
%24
%%一%
%24

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