Question

M-Tek Manufacturing, Inc., makes to types of Industrial component parts the 5300 and the T500. An absorption couting Income statement for the most recent periods show Hi-Tek Manufacturing Inc. Income Statement Sales $1,712, Bee Cost of goods sold 1.217,335 Gross margin Selling and administrative expenses Net operating loss $ 87,335 Hi-Tek produced and sold 60100 units of B300 st price of $20 per united 2700 units of T500 price of $40 per unit The company's traditional cost system allocates manufacturing overhead to products using a planwide overhead rate and direct labor dos as the location base. Adetonalnormation relating to the company's two product lines shown below B32 Tsee $400, 0 $162, See $ $120, see $ 42,720 Total 563, 163, 280 Direct materials Direct labor Manufacturing overhead Cost of goods sold $1,217,335 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek ABC implementation team concluded that $53.000 and $103.000 of the company's scivertising 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 manufacturing overhead to four activities as shown below. Manufacturing Activity Activity Cost Pool (and Activity Measure) Overhead 8300 TSee Total Machining machine hours) $206,415 92,880 62,120 152,980 Setups (setup hours) 123,820 382 Product sustaining number of products) 100, 200 Other (organization Sustaining costs) 68,700 NA NA Total manufacturing overhead cost 3491,135 Required: 1. 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 Complete this question by entering your answers in the tabs below. Required: Required 2 cuired Compute the product margins for the 200 and TSC under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) B00 T 800 Total Product margin Required 2 >

Answer 1

Answers 1 Product Margin under Traditional Costing B300 Product Margin 318295 2 Product Margin under Activity Based costing B300 Product Margin 425800 T500 174273 Total 492568 T500 -28435 Total 397365

3. Quantitative Comparision of the Traditional and Activity Based Cost Assignments Quantitative comparsion of the Traditional Cost B300 I T500 Total 563000 163200 491232 1217432 580000 1797432 Total Traditional Costing System Amount % Amount % Direct Material 400500 71.1% 162500 28.9% DirectLabor 120500 73.8% 42700 26.2% Manufacturing Overheads 362705 73.8%) 128527 26.2% Total Cost Assigned to Products 883705 333727 Selling and Administrative Expenses Total Cost Quantitative Comparison of Acticity Based Cost Assignments B300 T500 Activty Based Costing System Amount % Amount 1 % Direct Cost Direct Material 400500 71.1% 162500 28.9% Direct Labor 120500 73.8% 42700 26.2% Advertisements (Traced) 53000 34.0% 103000 66.0% Indirect Cost Machining 122580 122580 59 402 82925 59.4% 83835| 40.6% Batch setup 29520 23.8% 94300 76.2% Prodcut Sustainind 50100 50.0% 50100 50.0% Total Cost Assigned to Products 776200 536435 Cost Not asigned to the Products Selling and Administrative Expenses Others Total Cost 563000 163200 156000 206415 123820 100200 1312635 424000 60700 1736635

40 Working Notes B300 T500 Total Selling Price 20 Direct Material 400500 162500 563000 Direct Labor 120500 427001 163200 Production in Units 60100 12700 72800 Manufacturing Overheads 491135 Advertisements (Traced) 53000 103000 Selling and Administrative Expenses 580000 Maufacturing OH 491135 Estimated Labor Dollars 163200 Predetermined Overhead Rate 3.01 491135/163200 72 MOH Activity B300 T500 Total Machining 206415 90800 62100 152900 Setups 123820 230302 Prodcut sustaining 100200 1 2 Others 60700 491135 Traditional Costing System B300 T500 Total sales 1202000 508000 1710000 Direct Material 400500 1625001 563000 Direct Labor 120500 42700 163200 Manufacturing Overheads 362705 128527 491232 Total Manufacturing Cost 883705 333727 1217432 Product Margin 318295 174273 492568

Determination of Activity Rate Activty Pool Machining Batch setup Prodcut Sustaining Activity Based Costing System Estimated OH 206415 123820 100200 Base 152900 302 2 Activity Rate 1.35 410.00 50100 sales Direct Material Direct Labor Advertisements (Traced) Matching (Activity * Rate) Batch Setup (Activity * Rate) Prodcut Sustaining Total Cost Product Margin B300 1202000 400500 120500 530001 122580 29520 50100 776200 425800 T500 Total 508000 1710000 1625001 563000 42700 163200 103000 156000 83835 206415 943001 123820 50100 100200 536435 1312635 -28435 397365