Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statementfor the most recent period is shown below:SalesHi-Tek Manufacturing, IncorporatedCost of goods soldIncome StatementGross marginSelling and administrative expensesNet operating loss$ 1,708,0001,255,280452,720620,000$ (167,280)Hi-Tek produced and sold 60,000 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $40 per unit. Thecompany's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating to the company's two product lines is shown below:Direct materialsDirect laborManufacturing overheadCost of goods soldB300$ 400,600$ 121,000T500$ 163,000$ 42,400Total$ 563,600163,400528,280$ 1,255,280The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation teamconcluded that $57,000 and $107,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively.The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed thecompany's manufacturing overhead to four activities as shown below:Activity Cost Pool (and Activity Measure)Machining (machine-hours)Setups (setup hours)Product-sustaining (number of products)Other (organization-sustaining costs)Total manufacturing overhead costManufacturingOverhead$ 214,340152,040101,200B30090,30072ActivityT50062,800290111Total153,100362260,700NANANA$ 528,280 Compute the product margins for B300 and T500 under the company's traditional costing system. Compute the product margins for B300 and T500 under the activity-based costing system. Prepare a quantitativecomparison of the traditional and activity-based cost assignments.

Activity-Based Costing (ABC) is a costing methodology that assigns overhead costs to specific…

Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statemen for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement 700 000

Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statemen for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement 700 000

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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