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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.

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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $19 per unit and 12,600 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold $1,645,900 1,209,229 436,672 610,000 $ (173,328) T500 B300 $ 400,200 $ 162,900 $ 120,600 $ 42,800 Activity Cost Pool (and Activity Measure) Machining (nachine-hoors) 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 $107,000 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: Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Total $563,100. 163,400. 482,728 $ 1,209,220 Manufacturing Overhead $ 201,828 119,200. 100,800 60, 900 $482.728 8300 90,200 78 1 NA Activity 7500 62,700 220 1 NA Total 152,900 298 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 60,100 units of B300 at a price of $19 per unit and 12,600 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold $1,645,900 1,209,229 436,672 610,000 $ (173,328) T500 B300 $ 400,200 $ 162,900 $ 120,600 $ 42,800 Activity Cost Pool (and Activity Measure) Machining (nachine-hoors) 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 $107,000 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: Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Total $563,100. 163,400. 482,728 $ 1,209,220 Manufacturing Overhead $ 201,828 119,200. 100,800 60, 900 $482.728 8300 90,200 78 1 NA Activity 7500 62,700 220 1 NA Total 152,900 298 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 21 Required 3 Compute the product margins for the 8300 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 Product margin Traditional Cost System Total cost assigned to products Total cost 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.) Activity-Based Costing System Direct costs: Indirect costs: B300 Total cost assigned to products Costs not assigned to products: Total cost B300 S T500 Required 1 $ Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) T500 < Required 1 Amount 8300 Amount 0 8300 0 Total % of % of Total Amount Required 2 > Total 0 $ $ 0 Required 3 > T500 Amount 0 T500 Amount 0 % of % of Total Amount Total Amount $ $ Total Amount $ 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 21 Required 3 Compute the product margins for the 8300 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 Product margin Traditional Cost System Total cost assigned to products Total cost 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.) Activity-Based Costing System Direct costs: Indirect costs: B300 Total cost assigned to products Costs not assigned to products: Total cost B300 S T500 Required 1 $ Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) T500 < Required 1 Amount 8300 Amount 0 8300 0 Total % of % of Total Amount Required 2 > Total 0 $ $ 0 Required 3 > T500 Amount 0 T500 Amount 0 % of % of Total Amount Total Amount $ $ Total Amount $ 0 0
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