Hi-Tek Manufacturing Inc. makes two types of industrial
component partsA????1the B300 and the T500. An absorption costing income
statement for the most recent period is shown below:
Hi-Tek Manufacturing Inc.
| Cost of goods|
| Selling and|
| Net operating|
Hi-Tek produced and sold 60,200 units of B300 at a price of $20
per unit and 12,600 units of T500 at a price of $39 per unit. The
companyA????1s 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 companyA????1s two product lines is shown below:
| Cost of goods|
The company has created an activity-based costing system to
evaluate the profitability of its products. Hi-TekA????1s ABC
implementation team concluded that $52,000 and $104,000 of the
companyA????1s 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 companyA????1s manufacturing overhead to four activities
as shown below:
| Activity Cost Pool|
(and Activity Measure)
| Setups (setup|
(number of products)
| Total manufacturing|
Compute the product margins for the B300 and T500 under the
companyA????1s traditional costing system. (Round your
intermediate calculations to 2 decimal places and final answer to
the nearest whole dollars.)
Compute the product margins for B300 and T500 under the
activity-based costing system. (Negative product margins
should be indicated by a minus sign. Round your intermediate
calculations to 2 decimal places.)
Prepare a quantitative comparison of the traditional and
activity-based cost assignments. (Round your intermediate
calculations to 2 decimal places and "Percentage" answer to 1
decimal place. (i.e. .1234 should be entered as 12.3) and other
answers to nearest whole dollar amounts.)
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