Hello! I'm facing troubles solving question #3 : (thanks in advance!) 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 below: Hi-Tek Manufacturing Inc.Income Statement Sales $ 2,100,000 Cost of goods sold 1,600,000 Gross margin 500,000 Selling and administrative expenses 550,000 Net operating loss $ (50,000) Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 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: B300 T500 Total Direct materials $ 436,300 $ 251,700 $ 688,000 Direct labor $ 200,000 $ 104,000 304,000 Manufacturing overhead 608,000 Cost of goods sold $ 1,600,000 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek�s ABC implementation team concluded that $50,000 and $100,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 213,500 90,000 62,500 152,500 Setups (setup hours) 157,500 75 300 375 Product-sustaining (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 NA NA NA Total manufacturing overhead cost $ 608,000 1. Compute the product margins for the B300 and T500 under the company�s traditional costing system. B300 T500 Total Product margin 2. Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) B300 T500 Total Product margin 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

Hello! I'm facing troubles solving question #3 : (thanks in advance!) 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 below: Hi-Tek Manufacturing Inc.Income Statement Sales $ 2,100,000 Cost of goods sold 1,600,000 Gross margin 500,000 Selling and administrative expenses 550,000 Net operating loss $ (50,000) Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 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: B300 T500 Total Direct materials $ 436,300 $ 251,700 $ 688,000 Direct labor $ 200,000 $ 104,000 304,000 Manufacturing overhead 608,000 Cost of goods sold $ 1,600,000 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek�s ABC implementation team concluded that $50,000 and $100,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead B300 T500 Total Machining (machine-hours) $ 213,500 90,000 62,500 152,500 Setups (setup hours) 157,500 75 300 375 Product-sustaining (number of products) 120,000 1 1 2 Other (organization-sustaining costs) 117,000 NA NA NA Total manufacturing overhead cost $ 608,000 1. Compute the product margins for the B300 and T500 under the company�s traditional costing system. B300 T500 Total Product margin 2. Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) B300 T500 Total Product margin 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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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Hello! I'm facing troubles solving question #3 : (thanks in advance!)

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 below:

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	2,100,000
Cost of goods sold		1,600,000

Gross margin		500,000
Selling and administrative expenses		550,000

Net operating loss	$	(50,000)

Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17,500 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:

	B300	T500	Total
Direct materials	$	436,300	$	251,700	$	688,000
Direct labor	$	200,000	$	104,000		304,000
Manufacturing overhead						608,000

Cost of goods sold					$	1,600,000

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek�s ABC implementation team concluded that $50,000 and $100,000 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:

	Manufacturing	Activity
Activity Cost Pool (and Activity Measure)	Overhead	B300	T500	Total
Machining (machine-hours)	$	213,500	90,000	62,500	152,500
Setups (setup hours)		157,500	75	300	375
Product-sustaining (number of products)		120,000	1	1	2
Other (organization-sustaining costs)		117,000	NA	NA	NA

Total manufacturing overhead cost	$	608,000

1. Compute the product margins for the B300 and T500 under the company�s traditional costing system.

	B300	T500	Total
Product margin

2. Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.)

	B300	T500	Total
Product margin

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))

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