# Hi-Tek Manufacturing, Inc., makes two types of industrial component parts--the B300 and the T500. An absorption...

###### 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 Sales $Hi-Tek Manufacturing Inc. Income Statement Cost of goods sold Gros margin Selling and administrative expenses Net operating loss 1.645.900 1.261.053 384.847 610.000 ences Hi-Tek produced and sold 60,100 units of B300 at a price of$19 per unit and 12,600 units of T500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additional information relating to the company's two product lines is shown below: B300$ 400, 600 $120,500 1500$ 162.600 $42.500$ Direct materials Direct labor Kanufacturing overhead Cost of goods sold Total 563.200 163.000 534,863 1. 261.053 The company has created an activity-based costing system to evaluate the profitability of its products Hi-Tek's ABC implementation team concluded that $60,000 and$109,000 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 Manufacturing Overhead $212. 263 161, 100 100.600 60.900 Activity 83001500Total 9 0.200 62.500 152.700 Activity Cost Pool (and activity Messure) Machining machine hours) Setup (setup hours) Product-sustaining tumber of products) Other (Organization-staining costs) Total manufacturing overhead cost 534053 Hi-Tek produced and sold 60,100 units of B300 at a price of$19 per unit and 12,600 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$400.000 $120,500 Direct materials Direct labor Manufacturing overhead Cost of goods sold T500$ 162, 600 $42,500 16.000 Total$ 563, 200 163.000 _ 534, 853 $1,261,053 682,869 51,261, 053 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that$60,000 and $109,000 of the company's advertising expenses could be directly traced to B300 and 1500. respectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also distributed the company's manufacturing overhead to four activities as shown below: Manufacturing Overhead$ 212, 263 161,100 100, 600 60, 900 534, 853 B300 90, 200 78 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 Activity T600 62,500 280 1 NA T otal 152.700 368 NA 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 1 Required 2 Required 3

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