Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300

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 below Hi-Tek Manufacturing Indc Income Statement Sales Cost of goods sold $1,770,100 1,254,330 515,770 610,000 Gross margin Selling and administrative expenses Net operating loss $ (94,230) Hi-Tek produced and sold 60,100 units of B300 at a price of $21 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 B300 T500 Total Direct materials Direct labor Manufacturing overhea $ 400,200 162,100 $ 562,300 163,000 529,030 $120,800 42,200 Cost of goods sold $ 1,254,330 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 $106,000 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:

Explanation / Answer

Hi Tek Products     1 Product Margin under Traditional   costing System B 300 T 500 Total Details Units Produced              60,100              12,700 Unit selling price                      21                      40 Sales Revenue        1,262,100           508,000    1,770,100 Direct Materials            400,200           162,100        562,300 Direct Labor            120,800              42,200        163,000 Manufacturing OH (as % of direct Labor)            392,064           136,966        529,030 Cost of Goods Sold            913,064           341,266    1,254,330 Gross Profit            349,036           166,734        515,770 Product Margin               349,036           166,734        515,770     2 Activity costdetails Activity Allocation   Activity cost pool (measures) Overhead cost B 300 T 500 Total Activity Rate   B 300 T 500 Machining (m/c hrs)            211,830              91,000          62,500        153,500 $             1.38         125,580             86,250 Set Up ( set up hours)            155,700                      76                270                346 $        450.00            34,200           121,500 Product sustaining (no of products)            101,400                        1                     1                     2 $ 50,700.00            50,700             50,700 Other (org sustaining)              60,100 Total Mfg OH costs            529,030         210,480           258,450     3 Product Margin Under Activity costing Products B 300 T 500 Total Details Units Produced              60,100              12,700 Unit selling price                      21                      40 Sales Revenue        1,262,100           508,000    1,770,100 Direct Materials            400,200           162,100        562,300 Direct Labor            120,800              42,200        163,000 Manufacturing OH As per ABC            210,480           258,450        468,930 Traceable Cost of Goods Sold            731,480           462,750    1,194,230 Gross Profit            530,620              45,250        575,870 Less Traceable Selling & Admion cost              55,000           106,000        161,000 Product Margin               475,620           (60,750)        414,870 Less Common Manufacturing OH          60,100 Less Common selling & Admin Cost        449,000 Net Operating Income /(loss)        (94,230)     4 Hi Tek Products Product Margin under Traditional   costing System B 300 % of total Amt T 500 % of total Amt Total Details Units Produced              60,100          12,700 Unit selling price                      21                  40 Sales Revenue        1,262,100        508,000      1,770,100 Direct Materials            400,200 43.83%        162,100 47.5%          562,300 Direct Labor            120,800 13.23%          42,200 12.4%          163,000 Manufacturing OH (as % of direct Labor)            392,064 42.94%        136,966 40.1%          529,030 Total Cost Allocated to Products            913,064        341,266      1,254,331 Product Margin               349,036        166,734          515,769 Activity Based Costing System Products B 300 % of total Amt T 500 % of total Amt Total Details Units Produced              60,100          12,700 Direct Costs Direct Materials            400,200 50.9%        162,100 28.5%          562,301 Direct Labor            120,800 15.4%          42,200 7.4%          163,000 Indirect Costs Manufacturing OH As per ABC            210,480 26.8%        258,450 45.4%          468,930 Traceable Selling & Admion cost              55,000 7.0%        106,000 18.6%          161,000 Total Cost Assigned to Products            786,480        568,750      1,355,231 Costs not Assigned to products Common Manufacturing OH            60,100 Common selling & Admin Cost          449,000 Total Cost        1,864,331

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.