MBA515 Homework 5
See attachment and all blanks have to be filled in
Hi-Tek Manufacturing, Inc., makes two types of industrial component partsthe B300 and the T500. An absorption costing income statement for the most recent period is shown:
Hi-Tek Manufacturing Inc.
Income Statement
Sales
$
1,704,000
Cost of goods sold
1,232,520
Gross margin
471,480
Selling and administrative expenses
560,000
Net operating loss
$
(88,520
)
Hi-Tek produced and sold 60,200 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit. The companys 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 companys two product lines is shown below:
B300
T500
Total
Direct materials
$
400,800
$
162,200
$
563,000
Direct labor
$
120,700
$
42,200
162,900
Manufacturing overhead
506,620
Cost of goods sold
$
1,232,520
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Teks ABC implementation team concluded that $55,000 and $107,000 of the companys 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 companys manufacturing overhead to four activities as shown below:
Manufacturing
Overhead
Activity
Activity Cost Pool (and Activity Measure)
B300
T500
Total
Machining (machine-hours)
$
208,080
91,000
62,000
153,000
Setups (setup hours)
136,740
78
240
318
Product-sustaining (number of products)
101,400
1
1
2
Other (organization-sustaining costs)
60,400
NA
NA
NA
Total manufacturing overhead cost
$
506,620
Required:
1. Compute the product margins for the B300 and T500 under the companys 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
Compute the product margins for the B300 and T500 under the companys traditional costing system.(Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)
B300
T500
Total
Product margin
$0
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
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.)
B300
T500
Total
Product margin
$0
Prepare a quantitative comparison of the traditional and activity-based cost assignments.(Round your intermediate calculations to 2 decimal places and “Percentage” answers to 1 decimal place and and other answers to the nearest whole dollar amounts.)
B300
T500
Total
% of
% of
Amount
Amount
Amount
Traditional Cost System
%
%
%
%
%
%
Total cost assigned to products
$0
$0
$0
Total cost
$0
B300
T500
Total
% of
% of
Amount
Total Amount
Amount
Total Amount
Amount
Activity-Based Costing System
Direct costs:
%
%
%
%
%
%
Indirect costs:
%
%
%
%
%
%
Total cost assigned to products
$0
$0
0
Costs not assigned to products:
Total cost
$0
