for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses $ 1,699,300 1,245,666 453,634 630,000 Net operating loss $ (176,366) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,700 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 Manufacturing overhead Cost of goods sold B300 $ 401,000 $ 162,700 $ 120,100 $ 42,900 T500 Total $ 563,700 163,000 518,966 $ 1,245,666 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $108,000 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 Required: Manufacturing Overhead $ 209,336 146,630 B300 90,300 Activity T500 Total 62,500 152,800 71 270 341 102,000 1 1 2 61,000 NA NA NA $ 518,966 1. Compute the product margins for 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.
for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses $ 1,699,300 1,245,666 453,634 630,000 Net operating loss $ (176,366) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,700 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 Manufacturing overhead Cost of goods sold B300 $ 401,000 $ 162,700 $ 120,100 $ 42,900 T500 Total $ 563,700 163,000 518,966 $ 1,245,666 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $108,000 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 Required: Manufacturing Overhead $ 209,336 146,630 B300 90,300 Activity T500 Total 62,500 152,800 71 270 341 102,000 1 1 2 61,000 NA NA NA $ 518,966 1. Compute the product margins for 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:for the most recent period is shown below:
Hi-Tek Manufacturing, Incorporated
Income Statement
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
$ 1,699,300
1,245,666
453,634
630,000
Net operating loss
$ (176,366)
Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,700 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
Manufacturing overhead
Cost of goods sold
B300
$ 401,000 $ 162,700
$ 120,100 $ 42,900
T500
Total
$ 563,700
163,000
518,966
$ 1,245,666
The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team
concluded that $52,000 and $108,000 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
Required:
Manufacturing
Overhead
$ 209,336
146,630
B300
90,300
Activity
T500
Total
62,500
152,800
71
270
341
102,000
1
1
2
61,000
NA
NA
NA
$ 518,966
1. Compute the product margins for 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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