Dhapa Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the B300 and the T500. An absorption costingincome statement for the most recent period is shown:Hi-Tek Manufacturing IncorporatedIncome StatementSalesCost of goods soldGross marginSelling and administrative expensesNet operating lossHi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,700 units of T500 at a price of $39 per unit. Thecompany's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating to the company's two product lines is shown below:Direct materialsDirect laborManufacturing overheadCost of goods sold$ 1,697,3001,223,490473,810560,000$ (86,190)Activity Cost Pool (and Activity Measure)Machining (machine-hours)Setups (setup hours)Product-sustaining (number of products)Other (organization-sustaining costs)Total manufacturing overhead costB300$ 400,700$ 120,200T500$ 162,400$ 43,000The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementationteam concluded that $55.000 and $102,000 of the company's advertising expenses could be directly traced to B300 and T500.respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team alsodistributed the company's manufacturing overhead to four activities as shown below:ManufacturingOverheadTotal$ 563,100163,200497,190$ 1,223,490$ 198,250137,340101,00060,600$ 497,190830090, 100771NAActivityT50062,4002501ΝΑTotal152,500327Required: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.2NA

Name: Dhapa Hi-Tek Manufacturing, Incorporated, makes two types of industria
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Description: Dhapa Hi-Tek Manufacturing, Incorporated, makes two types of industrial component parts-the B300 and the T500. An absorption costingincome statement for the most recent period is shown:Hi-Tek Manufacturing IncorporatedIncome StatementSalesCost of goo

A method of allocating overhead and indirect expenses to goods and services is called activity-based…

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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 60,100 units of B300 at a price of $20 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 $ 1,697,300 1,223,490 473,810 560,000 $ (86,190) Manufacturing overhead Cost of goods sold 8300 $ 400,700 $ 120,200 T500 $ 162,400 $ 43,000 Total $ 563,100 163,200 497,190 $ 1,223,490 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $102,000 of the company's advertising expenses could be directly traced to B300 and T500.

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 60,100 units of B300 at a price of $20 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 $ 1,697,300 1,223,490 473,810 560,000 $ (86,190) Manufacturing overhead Cost of goods sold 8300 $ 400,700 $ 120,200 T500 $ 162,400 $ 43,000 Total $ 563,100 163,200 497,190 $ 1,223,490 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $55,000 and $102,000 of the company's advertising expenses could be directly traced to B300 and T500.

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Dhapa

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 60,100 units of B300 at a price of $20 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
$ 1,697,300
1,223,490
473,810
560,000
$ (86,190)
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
$ 400,700
$ 120,200
T500
$ 162,400
$ 43,000
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation
team concluded that $55.000 and $102,000 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
$ 563,100
163,200
497,190
$ 1,223,490
$ 198,250
137,340
101,000
60,600
$ 497,190
8300
90, 100
77
1
NA
Activity
T500
62,400
250
1
ΝΑ
Total
152,500
327
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.
2
NA

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