Question

LII.1. IIUITIVUIK 1 Help Save & EXIT Submit Check my work 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: 1.33 points Hi-Tek Manufacturing Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $ 1,693,400 1,254,832 438,568 550.000 $ (111,432) eBook Print References Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,600 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 B300 T500 Total $ 400,600 $ 162,600 $ 563,200 $ 120,500 $ 42,800 163,300 528, 332 $ 1,254,832 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $109,000 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:
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Answer 1

Answers 1 Product Margin under Traditional Costing B300 Product Margin 290480 2 Product Margin under Activity Based costing B300 Product Margin 424293 T500 1 47328 Total 437808 T500 -85725 Total 338568

3. Quantitative Comparision of the Traditional and Activity Based Cost Assignments Quantitative comparsion of the Traditional Cost B300 T500 Total 563200 163300 529092 1255592 550000 1805592 Total Traditional Costing System Amount % Amount % Direct Material 400600 71.1% 162600 28.9% DirectLabor 12050073.8% 42800|| 26.2% Manufacturing Overheads 390420 73.8% 138672 26.2% Total Cost Assigned to Products 911520 344072 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 400600 71.1% 162600 28.9% Direct Labor 120500 73.8% 42800 26.2% Advertisements (Traced) 52000 32.3% 109000 67.7% Indirect Cost Machining 120897 59.3% 83125 40.7% Batch setup 33110 20.4% 129000 79.6% Prodcut Sustainind 50600 50.0% 50600 50.0% Total Cost Assigned to Products 777707 577125 Cost Not asigned to the Products Selling and Administrative Expenses Others Total Cost 563200 1633001 161000 204022 162110 101200 1354832 389000 610001 1743832

20 39 Working Notes B300 T500 Total Selling Price Direct Material 400600 162600 563200 Direct Labor 120500 42800 163300 Production in Units 60100 12600 72700 Manufacturing Overheads 528332 Advertisements (Traced) 52000 109000 Selling and Administrative Expenses 550000 Maufacturing OH 528332 Estimated Labor Dollars 163300 Predetermined Overhead Rate 3.24 528332/163300 MOH Activity B300 T T500 Total Machining 204022 90900 62500 153400 Setups 162110 300377 Prodcut sustaining 101200 Others 61000 528332 Traditional Costing System B300 T500 Total sales 1202000 4914001 1693400 Direct Material 400600 162600563200 Direct Labor 120500 42800 163300 Manufacturing Overheads (Rate *labour) 390420 138672) 529092 Total Manufacturing Cost 9115201 3440721255592 Product Margin 2904801 1473281 437808 771

Base 153400 377 - 2 Activity Rate 1.33 430.00 50600 Determination of Activity Rate Activty Pool Estimated OH Machining 204022 Batch setup 162110 Prodcut Sustaining 101200 Activity Based Costing System B300 sales 1202000 Direct Material 400600 Direct Labor 120500 Advertisements (Traced) 52000 Matching Activity *Rate) 120897 Batch Setup (Activity *Rate) 331101 Prodcut Sustaining 50600 Total Cost 7777071 Product Margin 424293 T500 Total 4914001693400 162600 563200 42800 163300 109000 161000 83125 204022 129000 1621101 50600 101200 577125 1354832 -85725 338568