HI-Tek produced and sold 60,000 units of B300 at a price of $21 per unit and 12.,700 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: B300 $ 400,600 $ 162, 300 $ $ 120,900 $ 42,200 T500 Total Direct materials 562,900 Direct labor 163,100 Manufacturing overhead 491,932 Cost of goods sold $ 1,217,932 The company has created an activity-based costing system to evaluate the profitablity of Its products. HI-Tek's ABC Implementation team concluded that $53,000 and $104,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. The remalnder of the selling and administrative expenses was organization-sustalning in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Manufacturing Overhead Activity T5ee Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) other (organization-sustaining costs) B300 Total $ 204, 752 90,100 62, 700 152, 80e 126, 280 78 230 308 100, 600 1 1 2 6e, 300 NA NA NA Total manufacturing overhead cost $ 491,932 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 asslignments.
HI-Tek produced and sold 60,000 units of B300 at a price of $21 per unit and 12.,700 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: B300 $ 400,600 $ 162, 300 $ $ 120,900 $ 42,200 T500 Total Direct materials 562,900 Direct labor 163,100 Manufacturing overhead 491,932 Cost of goods sold $ 1,217,932 The company has created an activity-based costing system to evaluate the profitablity of Its products. HI-Tek's ABC Implementation team concluded that $53,000 and $104,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. The remalnder of the selling and administrative expenses was organization-sustalning in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Manufacturing Overhead Activity T5ee Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) other (organization-sustaining costs) B300 Total $ 204, 752 90,100 62, 700 152, 80e 126, 280 78 230 308 100, 600 1 1 2 6e, 300 NA NA NA Total manufacturing overhead cost $ 491,932 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 asslignments.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
ch5_hw_qa1_part2_br
Transcribed Image Text:HI-Tek produced and sold 60,000 units of B300 at a price of $21 per unit and 12,700 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:
взве
T500
Total
$ 400, 600 $ 162,300 $
$ 120,900
Direct materials
562,900
Direct labor
$ 42, 200
163,100
Manufacturing overhead
491,932
Cost of goods sold
$ 1,217,932
The company has created an activity-based costing system to evaluate the profitability of its products. HI-Tek's ABC implementation
team concluded that $53,000 and $104,000 of the company's advertising expenses could be directly traced to B300 and T500,
respectively. The remalnder of the selling and administrative expenses was organization-sustalning in nature. The ABC team also
distributed the company's manufacturing overhead to four activities as shown below:
Manufacturing
Overhead
$ 204,752
Activity
Total
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
B300
1500
90,100
62,700
152,8ee
126, 280
78
230
308
100, 600
2
Other (organization-sustaining costs)
60, 300
NA
NA
NA
Total manufacturing overhead cost
$ 491,932
Requlred:
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 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.)
B300
T500
Total
Product margin
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