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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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ch5_hw_qa1_part3_sh

Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3
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
Т500
Total
% of
% of
Amount
Amount
Amount
Traditional Cost System
%
%
%
%
%
Total cost assigned to products
Total cost
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
Costs not assigned to products:
Total cost

Transcribed Image Text: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:
Hi-Tek Manufacturing Inc.
Income Statement
$ 1,767,600
1,223,118
544,482
600,000
Sales
Cost of goods sold
Gross margin
Selling and administrative expenses
Net operating loss
(55,518)
Hi-Tek produced and sold 60,400 units of B300 at a price of $21 per unit and 12,800 units of T500 at a price of $39 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
$ 400, 300 $ 162,700 $
$ 120,500
Direct materials
563,000
162,800
497,318
$ 1,223,118
Direct labor
$ 42,300
Manufacturing overhead
Cost of goods sold
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation
team concluded that $53,000 and $108,000 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
Activity
Activity Cost Pool (and Activity Measure)
Machining (machine-hours)
Setups (setup hours)
Product-sustaining (number of products)
Overhead
B300
T500
Total
$ 204,618
90,500 62,200
152,700
131,200
101,400
60,100
$ 497,318
80
240
320
1
1
2
Other (organization-sustaining costs)
NA
NA
NA
Total manufacturing overhead cost
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.
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