Accounting Information Systems
11th Edition
ISBN: 9780357156032
Author: Ulric J. Gelinas; Richard B. Dull; Patrick Wheeler
Publisher: Cengage Limited
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Chapter 15, Problem 3P
Summary Introduction
To draw: The context diagram for the system.
Introduction:
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Compute the product margins for B300 and T500 under the company's traditional costing system. Compute the product margins for B300 and T500 under the activity-based costing system. Prepare a quantitative
comparison of the traditional and activity-based cost assignments.
Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement
for the most recent period is shown below:
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 60,400 units of B300 at a price of $21 per unit and 12,800 units of T500 at a price of $39 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
$ 1,767,600
1,212,922
554,678
610,000
$ (55,322)
8300
T500
$ 400,300 $ 162,400
$ 120,100. $ 42,400
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Other…
A costing approach in which all manufacturing costs are product costs." This statement best describe.
a. Normal Costing
O b. Variable Costing
C. Absorption Costing
d. Actual Costing
Chapter 15 Solutions
Accounting Information Systems
Ch. 15 - Prob. 1RQCh. 15 - Explain the three key drivers of complexity in...Ch. 15 - Describe the three key characteristics of...Ch. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Prob. 11RQCh. 15 - Prob. 12RQCh. 15 - a. How are a bill of materials (BOM) and a routing...Ch. 15 - Prob. 14RQCh. 15 - Prob. 15RQCh. 15 - Prob. 16RQCh. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Why is inventory management and control important...Ch. 15 - Prob. 21RQCh. 15 - Prob. 1DQCh. 15 - Prob. 3DQCh. 15 - What industry do you believe is a leader in...Ch. 15 - Prob. 5DQCh. 15 - Prob. 6DQCh. 15 - Prob. 7DQCh. 15 - Prob. 8DQCh. 15 - In addition to the industries mentioned in...Ch. 15 - A main goal of JIT is zero inventories. a. Assume...Ch. 15 - Prob. 11DQCh. 15 - Discuss how the inventory process supports the...Ch. 15 - Prob. 13DQCh. 15 - Prob. 14DQCh. 15 - Prob. 1SPCh. 15 - Prob. 2SPCh. 15 - Prob. 3SPCh. 15 - Prob. 4SPCh. 15 - Prob. 5SPCh. 15 - Study Figure 15.8, showing the level 0 DFD of the...Ch. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - Prob. 5PCh. 15 - Prob. 6PCh. 15 - Prob. 7P
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- In the variable costing income statement, how are the fixed manufacturing costs reported, and how are the fixed selling and administrative expenses reported?arrow_forwardHappy Trails has this information for its manufacturing: Â Its income statement under absorption costing is: Prepare an income statement with variable costing and a reconciliation statement between both methods.arrow_forwardFrom the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object). b. Advertising costs are usually viewed as (period, product) costs. c. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs. d. Feedback is often used to (improve, direct) operations. e. A sacrifice made to obtain some benefit is a (cost, expense). f. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory). g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs.arrow_forward
- Trail Outfitters has this information for its manufacturing: Its income statement under absorption costing is as follows: Prepare an income statement with variable costing and a reconciliation statement between both methods.arrow_forwardFor which cost concept used in applying (he cost-plus, approach to product pricing are fixed manufacturing costs, fixed selling and administrative expenses, and desired profit allowed for in determining the markup? A. Total cost B. Product cost C. Variable cost D. Standard costarrow_forwardComfort Foods Inc. uses activity-based costing to determine product costs. For each activity listed in the left column, match an appropriate activity base from the right column. You may use items in the activity-base list more than once or not at all.arrow_forward
- Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling pricearrow_forwardRequired: 1. Assume that the company uses absorption costing. a. Calculate the unit product cost. b. Prepare an income statement for May. 2. Assume that the company uses variable costing. a. Calculate the unit product cost. b. Prepare a contribution format income statement for May.arrow_forwardCase Study: Cost Accounting for Operational Efficiency and Decision-Making Introduction: Cost accounting plays a pivotal role in helping organizations manage and optimize their financial resources. This case study delves into the realm of cost accounting, examining its significance in operational efficiency and decision-making within a business context. Cost Classification and Allocation: In cost accounting, costs are classified into various categories such as direct costs, indirect costs, variable costs, and fixed costs. Understanding these classifications enables businesses to allocate costs accurately to products, services, or departments. For instance, direct costs like raw materials can be directly traced to a specific product, while indirect costs like overhead may be allocated based on a predetermined formula. Job Order Costing in Manufacturing: For manufacturing businesses, job order costing is a common approach in cost accounting. This method involves assigning costs to…arrow_forward
- Which cost accounting method assumes that the cost of production is driven by the number of units produced? A. Activity-Based Costing (ABC)B. Standard CostingC. Absorption CostingD. Variable Costingarrow_forwardTo better determine profit goals, activity-based cost (ABC) accounting, which tries to identify the real costs (both variable and overhead) associated with serving each customer, is preferable to average cost accounting, which identifies the cost per unit at a certain production level. Select one: True False Aarrow_forwardThe following diagram is a cost-volume-profit graph for a manufacturing company: ^ O Volume с Select the answer that best describes the labeled item on the diagram. A. Area CDE represents the area of net loss. B. Line AC graphs total fixed costs. C. Point D represents a point at which the profit is greater than zero. D. Line AC graphs total costs.arrow_forward
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