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ANSWER ALL PARTS. NEED STEP BY STEP EXPLANATIONS FOR ALL PARTS. Hi-Tek Manufactu

ID: 2543536 • Letter: A

Question

ANSWER ALL PARTS. NEED STEP BY STEP EXPLANATIONS FOR ALL PARTS.

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 Inc. Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $1,708,000 1,214,848 493,152 630,000 $ (136,848) Hi-Tek produced and sold 60,000 units of B300 at a price of $20 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 o Cost of goods sold $400,500 $ 162,200 562,700 162,200 489,948 $1,214,848 $ 120,100 42,100 verhead The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,0 and $100,000 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: Activ T500 62,100 Manufacturing Total Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost Overhead $ 203,948 123,600 101,800 60,600 $ 489,948 B300 152,200 309 2 NA 90,100 79 230 NA NA

Explanation / Answer

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1 Product margin under traditional system is B300 T500 Total A No. of units 60,000 12,700 72,700 B Sale price per unit 20 40 C=A*B Sale Value 1,200,000 508,000 1,708,000 D Direct Material 400,500 162,200 562,700 E Direct Labor 120,100 42,100 162,200 F=D+E Total Direct Costs 520,600 204,300 724,900 G Manufacturing Overhead 362,779 127,169 489,948 TRUE H =F+G Total Product Cost 883,379 331,469 1,214,848 I=C-H Product Margin 316,621 176,531 493,152
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