Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statementfor the most recent period is shown below:Hi-Tek Manufacturing, IncorporatedIncome StatementSalesCost of goods soldGross marginSelling and administrative expensesNet operating lossHi-Tek produced and sold 60,500 units of B300 at a price of $21 per unit and 12,500 units of T500 at a price of $39 per unit. Thecompany's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating to the company's two product lines is shown below:Direct materialsDirect laborManufacturing overheadCost of goods sold$ 1,758,0001,252,580505,420550,000$ (44,580)B300$ 400,700$ 120,900Activity Cost Pool (and Activity Measure)Machining (machine-hours)Setups (setup hours)Product-sustaining (number of products)Other (organization-sustaining costs)Total manufacturing overhead costT500$ 162,300$ 42,200Total$ 563,000163, 100526,480$ 1,252,580The company created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation teamconcluded that $59,000 and $108,000 of the company's advertising expenses could be directly traced to B300 and T500,respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team alsodistributed the company's manufacturing overhead to four activities as shown below:ManufacturingOverhead$ 206,280158, 400101,40060,400$ 526,480B30090,600801ΝΑActivityT50062,2002801ΝΑTotal152,800Required:1. Compute the product margins for 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.3602ΝΑ

Predetermined overhead rate is computed as estimated overhead divided by estimated direct labor…

of goods sold margin ng and administrative expenses perating loss $ 1,758,000 1,252,580 materials. 505,420 550,000 $ (44,580) roduced and sold 60,500 units of B300 at a price of $21 per un y's traditional cost system allocates manufacturing overhead to s the allocation base. Additional information relating to the com B300 T500 $ 400,700 $ 162,300

of goods sold margin ng and administrative expenses perating loss $ 1,758,000 1,252,580 materials. 505,420 550,000 $ (44,580) roduced and sold 60,500 units of B300 at a price of $21 per un y's traditional cost system allocates manufacturing overhead to s the allocation base. Additional information relating to the com B300 T500 $ 400,700 $ 162,300

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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