Please help The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABCimplementation team concluded that $51,000 and $104,000 of the company's advertising expenses could be directly traced toB300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. TheABC team also distributed the company's manufacturing overhead to four activities as shown below:ActivityManufacturingOverhead$ 207,536Activity Cost Pool (and Activity Measure)Machining (machine-hours)Setups (setup hours)Product-sustaining (number of products)Other (organization-sustaining costs)взееT500Total90, 20062,400152, 600134, 64076230306101,0001160,900NANANATotal manufacturing overhead cost$ 504,076Required: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. Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B300 and the T500. An absorption costing incomestatement for the most recent period is shown:Hi-Tek Manufacturing Inc.Income Statement$ 1,712,0001,231,276480,724630, 000SalesCost of goods soldGross marginSelling and administrative expensesNet operating loss(149, 276)Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,600 units of T500 at a price of $40 per unit. Thecompany's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labordollars as the allocation base. Additional information relating to the company's two product lines is shown below:B300$ 400,700 $ 162,600 $$ 120,900 $ 43,000T500TotalDirect materials563,300Direct labor163,900Manufacturing overhead504, 076Cost of goods sold$ 1,231, 276

Solution 1: Total Manufacturing Overhead 504076 /Total Direct labor 163900 Predetermined overhead rate 3.08 Computation of Product Margin - Traditional Costing System Particulars B300 T500 Total Sales (Unit Sales*Price) $12,08,000 $5,04,000 $17,12,000 Direct material $4,00,700 $1,62,600 $5,63,300 Direct labor $1,20,900 $43,000 $1,63,900 Manufacturing overhead ($3.08 * Direct labor) $3,72,372 $1,32,440 $5,04,812 Product Margin $3,14,028 $1,65,960 $4,79,988 Solution 2: Determination of activity rate for each activity & allocation of overhead Activity Estimated Overhead Cost Activity Base Usage of Activity Base Activity Rate B300 T500 Usage Allocated Costs Usage Allocated Costs Machining $2,07,536 Machine hours 152600 $1.36 90200 $1,22,672 62400 $84,864 Setups $1,34,640 Setup hours 306 $440.00 76 $33,440 230 $1,01,200 Product sustaining $1,01,000 Number of products 2 $50,500.00 1 $50,500 1 $50,500 Other $60,900 No allocation Total $5,04,076 $2,06,612 $2,36,564 Computation of Product Margin - Activity based Costing System Particulars B300 T500 Total Sales $12,08,000 $5,04,000 $17,12,000 Direct material $4,00,700 $1,62,600 $5,63,300 Direct labor $1,20,900 $43,000 $1,63,900 Allocated Manufacturing overhead $2,06,612 $2,36,564 $4,43,176 Advertising Expense $51,000 $1,04,000 $1,55,000 Product Margin $4,28,788 -$42,164 $3,86,624 Solution 3: Quantity comparison of traditional cost assignment Particulars B300 T500 Total Amount % of total Amount Amount % of total Amount Amount Direct Material Cost $4,00,700 71.1% $1,62,600 28.9% $5,63,300 Direct Labor Cost $1,20,900 73.8% $43,000 26.2% $1,63,900 Manufacturing Overhead cost $3,72,372 73.8% $1,32,440 26.2% $5,04,812 Total cost assigned to products $8,93,972 $3,38,040 $12,32,012 Total cost not assigned to product: Selling and adminstrative Expenses $6,30,000 Total Cost $18,62,012 Quantity comparison of Activity Based cost assignment Particulars B300 T500 Total Amount % of total Amount Amount % of total Amount Amount Direct Cost: Material Cost $4,00,700 71.1% $1,62,600 28.9% $5,63,300 Labor Cost $1,20,900 73.8% $43,000 26.2% $1,63,900 Advertising Expense $51,000 32.9% $1,04,000 67.1% $1,55,000 Indirect Cost: Machining $1,22,672 59.1% $84,864 40.9% $2,07,536 Setups $33,440 24.8% $1,01,200 75.2% $1,34,640 Product sustaining $50,500 50.0% $50,500 50.0% $1,01,000 Total Cost Assigned to Products $7,79,212 $5,46,164 $13,25,376 Cost not assigned to products: Manufacturing $60,900 Selling and administrative (630000- 51000-104000) $4,75,000 Total Cost $18,61,276

Business

Accounting

The company has created an activity-based costing system to evaluate the profitability of its prod implementation team concluded that $51,000 and $104,000 of the company's advertising expens B300 and T500, respectively. The remainder of the selling and administrative expenses was orga ABC team also distributed the company's manufacturing overhead to four activities as shown belo Manufacturing Activity Tota Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead взее T500 $ 207,536 134,640 101,00е 9e,2eе 62,4ее 152,6 76 230 NA 60,900 $ 504,076 NA Total manufacturing overhead cost

The company has created an activity-based costing system to evaluate the profitability of its prod implementation team concluded that $51,000 and $104,000 of the company's advertising expens B300 and T500, respectively. The remainder of the selling and administrative expenses was orga ABC team also distributed the company's manufacturing overhead to four activities as shown belo Manufacturing Activity Tota Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead взее T500 $ 207,536 134,640 101,00е 9e,2eе 62,4ее 152,6 76 230 NA 60,900 $ 504,076 NA Total manufacturing overhead cost

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.

Question

Please help

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC
implementation team concluded that $51,000 and $104,000 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:
Activity
Manufacturing
Overhead
$ 207,536
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Other (organization-sustaining costs)
взее
T500
Total
90, 200
62,400
152, 600
134, 640
76
230
306
101,000
1
1
60,900
NA
NA
NA
Total manufacturing overhead cost
$ 504,076
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.

Hi-Tek Manufacturing, Inc., 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 Inc.
Income Statement
$ 1,712,000
1,231,276
480,724
630, 000
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss
(149, 276)
Hi-Tek produced and sold 60,400 units of B300 at a price of $20 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:
B300
$ 400,700 $ 162,600 $
$ 120,900 $ 43,000
T500
Total
Direct materials
563,300
Direct labor
163,900
Manufacturing overhead
504, 076
Cost of goods sold
$ 1,231, 276

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