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 $ 1,757,400 Cost of goods sold 1,236,774 520,628 Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,100 units of 8300 at a price of $21 per unit and 12,700 units of T500 at a price of $39 per unit. The company's traditional cost system allocates to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the shown below Direct materials Direct labor Manufacturing overhead Cost of goods sold 400,500 $ 162,100 $ 562,600 120,900 42,900 63,800 510.374 774 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $54,000 and $107,000 of the companys advertising expenses could be directy traced to B300 and T500, respectively. The remainde nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below of the selling and administrative expenses was organization-sustaining in Activity Cost Pool (and Activity Measure) Overhead $ 208,624 139,950 101,200 60,600 510,374 91,000 62,400 240 153,400 311 Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost 71 NA NA NA equired Compute the product margins for the B300 and T500 under the company's traditional costing system. (Do not round your overhead rate. Round your other intermediate and MacBook Air

Explanation / Answer

B300 T500 Total Units 60100 12700 Sales Price 21 39 Direct Material 400500 162100 562600 Total Manufacturing OH 510374 Direct Labor 120900 42900 163800 Total Direct Labor Dollars 163800 Manufacturing OH 510374 Overhead Per Dollars 3.12 Cost of Goods Sold 1236774 1 B300 T500 2.011647255 3.377953 Sales Price 21.00 39.00 6.267963711 10.52515 Less: Direct Material 6.66 12.76 Less: Direct Labor 2.01 3.38 Less: Maufacturing OH 6.27 10.53 Product Margin 6.06 12.33 2 B300 T500 Activity Pools Amt B300 T500 Total Per Driver Sales Price 21.00 39.00 Machining 208624 91000 62400 153400 1.36 Less: Direct Material 6.66 12.76 Setups 139950 71 240 311 450 Less: Direct Labor 2.01 3.38 Product Sustaining 101200 1 1 2 50600 Less: Maufacturing OH 3.43 19.17 Other 60600 NA NA NA Product Margin 8.89 3.69 Total M OH 510374 Allocation: B300 T500 Machining 123760 84864 (Activity Driver* Rate) Setups 31950 108000 (Activity Driver* Rate) Product Sustaining 50600 50600 (Activity Driver* Rate) Total M OH 206310 243464 Units 60100 12700 B300 T500 Manufacturing OH 3.43 19.17 60100 12700 3 B300 T500 Total Traditional Cost System Amount % Amount % Amount Direct Material 4,00,500 44.59% 1,62,100 47.86% 5,62,600 Direct Labor 1,20,900 13.46% 42,900 12.67% 1,63,800 Manufacturing OH 3,76,705 41.94% 1,33,669 39.47% 5,10,374 Total Cost assigned to products 8,98,105 100.00% 3,38,669 100.00% 12,36,774 Traditional Cost System Amount % Amount % Amount Direct Costs: Direct Material 4,00,500 55% 1,62,100 36.15% 5,62,600 Direct Labor 1,20,900 17% 42,900 9.57% 1,63,800 Indirect Costs: Machining 1,23,760 17% 84,864 18.92% 2,08,624 Setups 31,950 4% 1,08,000 24.08% 1,39,950 Product Sustaining 50,600 7% 50,600 11.28% 1,01,200 Total Cost assigned to products 7,27,710 100% 4,48,464 100.00% 11,76,174 Costs not assigned to products: Others 60600 Total Cost 12,36,774

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