Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,400 units of B300 at a price of $19 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 $1.642.900 1,249,160 393,740 560,000 $ (166,260) 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 B300 $400,000 $ 120,000 T500 $ 162,500 $ 42,100 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $105,000 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: Total $562,500 162,100 524,560 $1,249,160 Manufacturing Overhead $ 201,960 160,600 101,800 60,200 $524,560 B300 90,200 75 1 ΝΑ Activity T500 62,800 290 1 ΝΑ Total 153,000 365 2 ΝΑ
Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,400 units of B300 at a price of $19 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 $1.642.900 1,249,160 393,740 560,000 $ (166,260) 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 B300 $400,000 $ 120,000 T500 $ 162,500 $ 42,100 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $105,000 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: Total $562,500 162,100 524,560 $1,249,160 Manufacturing Overhead $ 201,960 160,600 101,800 60,200 $524,560 B300 90,200 75 1 ΝΑ Activity T500 62,800 290 1 ΝΑ Total 153,000 365 2 ΝΑ
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Hi-Tek Manufacturing, Incorporated
Income Statement
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss
Direct materials
Direct labor
Manufacturing overhead
Cost of goods sold
$1,642,900
1,249,160
Hi-Tek produced and sold 60,400 units of B300 at a price of $19 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:
393,740
560,000
$ (166,260)
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
B300
$ 400,000
$ 120,000
T500
$ 162,500
$42,100
The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $105,000 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
Overhead
Total
$ 562,500
162,100
524,560
$1,249,160
$ 201,960
160,600
101,800
60,200
$ 524,560
B300
90,200
75
1
ΝΑ
Activity
T500
62,800
290
1
ΝΑ
Required:
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.
Total
153,000
365
2
ΝΑ
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