Hi-Tek Manufacturing, Incorporated, 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 Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,400 units of 8300 at a price of $19 per unit and 12,700 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold $ 1,642,900 1,246,912 395,988 590,000 $ (194,012) 8300 T500 $ 400,800 $ 162,100 $ 120,900 $ 42,700 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 Total $ 562,900 163,600 520,412 $ 1,246,912 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation eam concluded that $56,000 and $106,000 of the company's advertising expenses could be directly traced to 8300 and T500, espectively. The remainder of the selling and administrative expenses was organization-sustaining in nature. The ABC team also istributed the company's manufacturing overhead to four activities as shown below: Manufacturing Overhead $ 206,092 153, 120 100, 200 61,000 $ 520,412 8300 90,900 78 1 NA Activity T500 62,900 270 1 NA Total 153,800 348 2 NA

In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for …

The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on t…