Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B300 and the T500. An absorption costing incom 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 Net operating loss Hi-Tek produced and sold 60,500 units of B300 at a price of $21 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: Direct materials Direct labor $1,778,500 1,254,584 523,916 610,000 (86,084) Manufacturing overhead Cost of goods sold B300 $ 400,700 T500 $162,300 $ $ 120,100 $ 42,600 Total 563,000 162,700 528,884 $1,254,584 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57,000 and $103,000 of the company's advertising expenses could be directly traced to 8300 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 Manufacturing, Overhead $ 210,864 155,820 102,000 60,200 $ 528,884 Activity 1500 Total 152,800 8300 90,100 62,700 71 1 NA 300 1 NA 371 2 NA
Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B300 and the T500. An absorption costing incom 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 Net operating loss Hi-Tek produced and sold 60,500 units of B300 at a price of $21 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: Direct materials Direct labor $1,778,500 1,254,584 523,916 610,000 (86,084) Manufacturing overhead Cost of goods sold B300 $ 400,700 T500 $162,300 $ $ 120,100 $ 42,600 Total 563,000 162,700 528,884 $1,254,584 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $57,000 and $103,000 of the company's advertising expenses could be directly traced to 8300 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 Manufacturing, Overhead $ 210,864 155,820 102,000 60,200 $ 528,884 Activity 1500 Total 152,800 8300 90,100 62,700 71 1 NA 300 1 NA 371 2 NA
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
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Section: Chapter Questions
Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...
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The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal
places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.)
T500
Traditional Cost System
Total cost assigned to products
Total cost
Activity-Based Costing System.
Direct costs:
Indirect costs:
Total cost assigned to products
Costs not assigned to products:
Total cost
$
$
Amount
Amount
B300
0
B300
0
% of
%
%
%
% of
Total Amount
%
aaa
%
%
%
%
$
$
Amount
Amount
0
T500
0
% of
%
***
%
%
% of
Total Amount
se se se
%
%
%
%
%
%
$
$
$
Total
Amount
Total
Amount
0
0
0
Transcribed Image Text: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
Net operating loss
Direct materials
Direct labor
$1,778,500
1,254,584
Hi-Tek produced and sold 60,500 units of B300 at a price of $21 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:
Manufacturing overhead
Cost of goods sold
523,916
610,000
$ (86,084)
8300
T500
$ 400,700 $ 162,300 $
$ 120,100 $ 42,600
Total
563,000
162,700
528,884
$1,254,584
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC
implementation team concluded that $57,000 and $103,000 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
Manufacturing
Overhead
$ 210,864
155,820
102,000
60,200
$ 528,884
Activity
8300 T500 Total
90,100 62,700 152,800
71
300
1
NA
1
NA
371
2
NA
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