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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.

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.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
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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.

 

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 Sales Cost of goods sold Gross margin Selling and administrative expenses $ 1,657,500 1,224,620 432,880 620,000 Net operating loss $ (187,120) Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,700 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: в300 T500 Total $ 400,600 $ 120,400 Direct materials $ 162,700 $ 42,000 563,300 162,400 498,920 Direct labor Manufacturing overhead Cost of goods sold $ 1,224,620 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 $101,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. Thb 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 Overhead B300 T500 Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) 90,100 62,300 76 152,400 306 $ 205,740 131,580 101,600 60,000 230 1. NA NA NA Total manufacturing overhead cost $ 498,920 Required: %24
Transcribed Image Text: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 Sales Cost of goods sold Gross margin Selling and administrative expenses $ 1,657,500 1,224,620 432,880 620,000 Net operating loss $ (187,120) Hi-Tek produced and sold 60,500 units of B300 at a price of $19 per unit and 12,700 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: в300 T500 Total $ 400,600 $ 120,400 Direct materials $ 162,700 $ 42,000 563,300 162,400 498,920 Direct labor Manufacturing overhead Cost of goods sold $ 1,224,620 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 $101,000 of the company's advertising expenses could be directly traced to B300 and T500, respectively. Thb 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 Overhead B300 T500 Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) 90,100 62,300 76 152,400 306 $ 205,740 131,580 101,600 60,000 230 1. NA NA NA Total manufacturing overhead cost $ 498,920 Required: %24
places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 Total % of % of Amount Amount Amount Traditional Cost System Total cost assigned to products 2$ Total cost B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Indirect costs: Total cost assigned to products 24 0. 0. Costs not assigned to products: %24 %24 %24 %24 %%一% %24
Transcribed Image Text:places and "Percentage" answers to 1 decimal place and and other answers to the nearest whole dollar amounts.) B300 T500 Total % of % of Amount Amount Amount Traditional Cost System Total cost assigned to products 2$ Total cost B300 T500 Total % of % of Amount Total Amount Amount Total Amount Amount Activity-Based Costing System Direct costs: Indirect costs: Total cost assigned to products 24 0. 0. Costs not assigned to products: %24 %24 %24 %24 %%一% %24
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