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Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the 8300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Incorporated Income Statement Sales Cost of goods sold. Gross margin Selling and administrative expenses Net operating loss $1,642,900 1,246,912 395,988 590,000 $ (194,012) Hi-Tek produced and sold 60,400 units of 8300 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:

Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the 8300 and the T500. An absorption costing income statement for the most recent period is shown: Hi-Tek Manufacturing Incorporated Income Statement Sales Cost of goods sold. Gross margin Selling and administrative expenses Net operating loss $1,642,900 1,246,912 395,988 590,000 $ (194,012) Hi-Tek produced and sold 60,400 units of 8300 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:

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
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Hi-Tek Manufacturing, Incorporated, 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 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 1,246,912 395,988 590,000 $ (194,012) 8300 $ 400,800 $ 120,900 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 T500 $ 162,100. $ 42,700 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $56,000 and $106,000 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 $ 562,900 163,600 520,412 $ 1,246,912 Manufacturing Overhead $ 206,092 153, 120 100, 200 61,000 $ 520,412 8300 90,900 78 1 NA Activity T500 62,900 270 RIM 1 NA Total 153,800 348 2 NA
Transcribed Image Text:Hi-Tek Manufacturing, Incorporated, 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 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 1,246,912 395,988 590,000 $ (194,012) 8300 $ 400,800 $ 120,900 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 T500 $ 162,100. $ 42,700 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $56,000 and $106,000 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 $ 562,900 163,600 520,412 $ 1,246,912 Manufacturing Overhead $ 206,092 153, 120 100, 200 61,000 $ 520,412 8300 90,900 78 1 NA Activity T500 62,900 270 RIM 1 NA Total 153,800 348 2 NA
Required: 1. Compute the product margins for the 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 the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Product margin Required 1 Required 2 Product margin Required: 1. Compute the product margins for the 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. Traditional Cost System Total cost assigned to products. Total cost Activity-Based Costing System Direct costs: B300 Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) Indirect costs: Total cost assigned to products Costs not assigned to products: Total cost Required 3 B300 T500 4 $ $ T500 Amount Amount B300 0 $ B300 0 $ Total Total % of %% of Total Amount 0 0 $ $ Amount T500 0 T500 Amount 0 % of % of Total Amount Total Amount $ Total Amount $ 0 0 0 0
Transcribed Image Text:Required: 1. Compute the product margins for the 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 the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) Product margin Required 1 Required 2 Product margin Required: 1. Compute the product margins for the 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. Traditional Cost System Total cost assigned to products. Total cost Activity-Based Costing System Direct costs: B300 Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.) Indirect costs: Total cost assigned to products Costs not assigned to products: Total cost Required 3 B300 T500 4 $ $ T500 Amount Amount B300 0 $ B300 0 $ Total Total % of %% of Total Amount 0 0 $ $ Amount T500 0 T500 Amount 0 % of % of Total Amount Total Amount $ Total Amount $ 0 0 0 0
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