Question

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 Net operating loss $ 1,695,500 1,256, 320 439,180 600,000 $ (160, 820) Hi-Tek produced and sold 60,400 units of B300 at a price of $20 per unit and 12,500 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: B300 $ 400,500 $ 120,300 T500 $ 162,600 $ 42,100 Direct materials Direct labor Manufacturing overhead Cost of goods sold Total $ 563,100 162,400 530,820 $ 1,256,320

Please not that each item with a drop down must be filled.

Answer 1

Answers 1 Product Margin under Traditional Costing B300 Product Margin 293819 2 Product Margin under Activity Based costing B300 L Product Margin 427411 T500 145133 Total 438952 T500 -86631 Total 340780

3. Quantitative Comparision of the Traditional and Activity Based Cost Assignments Quantitative comparsion of the Traditional Cost B300 T500 Total 563100 1624001 531048 1256548 600000 1856548 Total Traditional Costing System Amount % Amount % Direct Material 400500| 71.1% 162600 28.9% DirectLabor 120300 74.1% 421001 25.9% Manufacturing Overheads 393381 74.1% 137667 25.9% Total Cost Assigned to Products 914181 342367 Selling and Administrative Expenses Total Cost Quantitative Comparison of Acticity Based Cost Assignments B300 T500 Activty Based Costing System Amount % Amount % Direct Cost Direct Material 400500 71.1% 162600 28.9% Direct Labor 120300 74.1% 42100 25.9% Advertisements (Traced) 52000 32.7% 107000 67.3% Indirect Cost Machining 1252391 58.9% 87431) 41.1% Batch setup 32250 20.5% 124700 79.5% Prodcut Sustainind 50300 50.0% 50300 50.0% Total Cost Assigned to Products 780589 574131 Cost Not asigned to the Products Selling and Administrative Expenses Others Total Cost 5631001 1624001 159000 212670 156950 100600 13547201 4410001 606001 1795720

20 39 Working Notes B300 T500 Total Selling Price Direct Material 400500 162600 563100 Direct Labor 120300 42100 1624001 Production in Units 60400 12500 72900 Manufacturing Overheads 5308201 Advertisements (Traced) 52000 107000 Selling and Administrative Expenses 600000 Maufacturing OH 530820 Estimated Labor Dollars 162400 Predetermined Overhead Rate 3.27530820/162400 MOH Activity B300 T500 Total Machining 212670 901001 62900 153000 Setups 156950 290 365 Prodcut sustaining 100600 Others 60600 5308201 Traditional Costing System B300 T500 Total sales 1208000 487500 1695500 Direct Material 400500 162600 563100 Direct Labor 120300 42100 162400 Manufacturing Overheads 393381 137667 531048 Total Manufacturing Cost 914181 342367 1256548 Product Margin 293819 145133 438952 75

Base Activity Rate 153000 1.39 365 430.00 2 50300 Determination of Activity Rate Activty Pool Estimated OH Machining 212670 Batch setup 156950 Prodcut Sustaining 100600 Activity Based Costing System B300 1208000 Direct Material 400500 Direct Labor 120300 Advertisements (Traced) Matching Activity *Rate) 125239 Batch Setup (Activity *Rate) 32250 Prodcut Sustaining 50300 Total Cost 780589 Product Margin 427411 sales T500 Total 4875001 1695500 162600 563100 42100 162400 107000 159000 87431 212670 124700 156950 50300 1006001 574131 1354720 -86631 340780