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 $ 1,647,600 1,207,955 439,645 640,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ (200,355) Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,500 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 Total $ 400,000 $ 120,500 T500 $ 162,900 $ 42,700 $ 562,900 163,200 481,855 $ 1,207,955 Direct materials Direct labor Manufacturing overhead Cost of goods sold The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $59,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total 153,100 277 Overhead B300 T500 $ 206,685 113,570 101,400 60,200 90,900 62,200 77 200 1 1 2 NA NA NA Total manufacturing overhead cost $ 481,855 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.) B300 T500 Total Product margin $
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 $ 1,647,600 1,207,955 439,645 640,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ (200,355) Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,500 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 Total $ 400,000 $ 120,500 T500 $ 162,900 $ 42,700 $ 562,900 163,200 481,855 $ 1,207,955 Direct materials Direct labor Manufacturing overhead Cost of goods sold The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $59,000 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: Manufacturing Activity Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total 153,100 277 Overhead B300 T500 $ 206,685 113,570 101,400 60,200 90,900 62,200 77 200 1 1 2 NA NA NA Total manufacturing overhead cost $ 481,855 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.) B300 T500 Total Product margin $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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
$ 1,647,600
1,207,955
439,645
640,000
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss
$ (200,355)
Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,500 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
T500
Total
$ 400,000
$ 120,500
$ 162,900
$ 42,700
$ 562,900
163,200
Direct materials
Direct labor
Manufacturing overhead
481,855
Cost of goods sold
$ 1,207,955
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation
team concluded that $59,000 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:
Manufacturing
Activity
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Other (organization-sustaining costs)
Overhead
B300
T500
Total
$ 206,685
113,570
101,400
90,900
62,200
153,100
77
200
277
1
1
60,200
NA
NA
NA
Total manufacturing overhead cost
$ 481,855
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.)
B300
T500
Total
Product margin
$

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
$ 1,647,600
1,207,955
439,645
640,000
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss
$ (200,355)
Hi-Tek produced and sold 60,400 units of B300 at a price of $19 per unit and 12,500 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
T500
Total
$ 400,000
$ 120,500
$ 162,900
$ 42,700
$ 562,900
163,200
Direct materials
Direct labor
Manufacturing overhead
481,855
Cost of goods sold
$ 1,207,955
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation
team concluded that $59,000 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:
Manufacturing
Activity
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Other (organization-sustaining costs)
Overhead
B300
T500
Total
$ 206,685
113,570
101,400
90,900
62,200
153,100
77
200
277
1
1
60,200
NA
NA
NA
Total manufacturing overhead cost
$ 481,855
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 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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