Hi-Tek Manufacturing, Inc., makes two types of industrial component p.docx - Hi-Tek Manufacturing Inc makes two types of industrial component parts-the

Hi-Tek Manufacturing, Inc., makes two types of industrial component p.docx

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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: 25 points Skipped Hi-Tek Manufacturing Inc. Income Statement Sales $1,716,000 Cost of goods sold 1,236,630 Gross margin 479,370 Selling and administrative expenses 590,000 Net operating loss $ (110,630) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 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. References Direct materials Direct labor Manufacturing overhead Cost of goods sold B380T500 Total $400,000 $162,100 $ 562,180 $120,780 $ 42,500 163,200 511,330 $1,236,630 The company has created an activity based costing system to evaluate the profitability of its
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Unformatted text preview: products. Hi-Tek's ABC implementation team concluded that $51,000 and $103,000 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 Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Manufacturing Activity Overhead B380 T580 Total $206,010 90,100 62,500 152,600 143,220 71 270 341 102,000 60,100 NA NA NA $511,330 Required: 1. Compute the product margins for the B300 and T500 under the company's traditional costing system. 2. Compute the product margins for 8300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments....
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  • Spring '19
  • Prof. Adnan Hamideh

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