Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Selling and administrative expenses Gross margin $ 1,712,000 1,254,186 457,814 640,000 Net operating loss $ (182,186) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 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 Manufacturing overhead Cost of goods sold B300 $ 400,100 $ 120,300 T500 $ 162,300 $ 42,100 Total $ 562,400 162,400 529,386 $ 1,254,186 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 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 $ 211,836 155,250 B300 90,100 Activity T500 62,300 75 270 101,600 1 1 Total 152,400 345 2 60,700 NA NA ΝΑ $ 529,386 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for B300 and T500 under the company's traditional costing system. Note: Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Product margin B300 T500 Total $ 0

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement
for the most recent period is shown below:
Hi-Tek Manufacturing, Incorporated
Income Statement
Sales
Cost of goods sold
Selling and administrative expenses
Gross margin
$ 1,712,000
1,254,186
457,814
640,000
Net operating loss
$ (182,186)
Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 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
Manufacturing overhead
Cost of goods sold
B300
$ 400,100
$ 120,300
T500
$ 162,300
$ 42,100
Total
$ 562,400
162,400
529,386
$ 1,254,186
The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team
concluded that $53,000 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
$ 211,836
155,250
B300
90,100
Activity
T500
62,300
75
270
101,600
1
1
Total
152,400
345
2
60,700
NA
NA
ΝΑ
$ 529,386
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.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Compute the product margins for B300 and T500 under the company's traditional costing system.
Note: Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.
Product margin
B300
T500
Total
$
0
Transcribed Image Text:Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Selling and administrative expenses Gross margin $ 1,712,000 1,254,186 457,814 640,000 Net operating loss $ (182,186) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 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 Manufacturing overhead Cost of goods sold B300 $ 400,100 $ 120,300 T500 $ 162,300 $ 42,100 Total $ 562,400 162,400 529,386 $ 1,254,186 The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 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 $ 211,836 155,250 B300 90,100 Activity T500 62,300 75 270 101,600 1 1 Total 152,400 345 2 60,700 NA NA ΝΑ $ 529,386 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for B300 and T500 under the company's traditional costing system. Note: Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Product margin B300 T500 Total $ 0
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