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Hi-Tek Manufacturing Inc. Income Statement $ 1,714,000 1,246,844 467,156 590,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ (122,844) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,800 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 $ 400,100 $ 120, 200 Direct materials $ 162,100 $ 562, 200 162, 200 Direct labor $ 42,000 Manufacturing overhead 522,444 Cost of goods sold $ 1,246,844 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $109,000 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: Manufactuning Activity

Hi-Tek Manufacturing Inc. Income Statement $ 1,714,000 1,246,844 467,156 590,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ (122,844) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,800 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 $ 400,100 $ 120, 200 Direct materials $ 162,100 $ 562, 200 162, 200 Direct labor $ 42,000 Manufacturing overhead 522,444 Cost of goods sold $ 1,246,844 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $109,000 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: Manufactuning Activity

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Hi-Tek Manufacturing Inc. Income Statement $ 1,714,000 1,246,844 467,156 Sales Cost of goods sold Gross margin Selling and administrative expenses 590,000 (122,844) Net operating loss $ Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,800 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 $ 400,100 $ 120, 200 Direct materials $ 162,100 $4 562, 200 162, 200 Direct labor $ 42,000 Manufacturing overhead 522,444 Cost of goods sold $ 1,246,844 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $109,000 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) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead B300 Т500 Total $ 209,884 150,060 91,000 62,200 153,200 76 290 366 101,600 1 1 2 60,900 NA NA NA Total manufacturing overhead cost $ 522,444
Transcribed Image Text:Hi-Tek Manufacturing Inc. Income Statement $ 1,714,000 1,246,844 467,156 Sales Cost of goods sold Gross margin Selling and administrative expenses 590,000 (122,844) Net operating loss $ Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,800 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 $ 400,100 $ 120, 200 Direct materials $ 162,100 $4 562, 200 162, 200 Direct labor $ 42,000 Manufacturing overhead 522,444 Cost of goods sold $ 1,246,844 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $109,000 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) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead B300 Т500 Total $ 209,884 150,060 91,000 62,200 153,200 76 290 366 101,600 1 1 2 60,900 NA NA NA Total manufacturing overhead cost $ 522,444
B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Direct materials 2$ 400,100 71.2 % 2$ 162,100 28.8 % 2$ 562,200 Direct labor 120,200 74.1 42,000 25.9 162,200 Advertising expense 53,000 32.7 % 109,000 67.3 % 162,000 Indirect costs: Direct labor 124,670 59.4 % 85,214 40.6 % 209,884 Setups 31,160 20.8 % 118,900 79.2 % 150,060 Product sustaining 50,800 50.0 50,800 50.0 101,600 Total cost assigned to products $ 779,930 $ 568,014 1,347,944 Costs not assigned to products: Other 60,900 Selling and administrative 428,000 Total cost $ 1,836,844
Transcribed Image Text:B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Direct materials 2$ 400,100 71.2 % 2$ 162,100 28.8 % 2$ 562,200 Direct labor 120,200 74.1 42,000 25.9 162,200 Advertising expense 53,000 32.7 % 109,000 67.3 % 162,000 Indirect costs: Direct labor 124,670 59.4 % 85,214 40.6 % 209,884 Setups 31,160 20.8 % 118,900 79.2 % 150,060 Product sustaining 50,800 50.0 50,800 50.0 101,600 Total cost assigned to products $ 779,930 $ 568,014 1,347,944 Costs not assigned to products: Other 60,900 Selling and administrative 428,000 Total cost $ 1,836,844
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