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 below:
Hi-Tek Manufacturing Inc. Income Statement |
|||
Sales | $ | 1,643,000 | |
Cost of goods sold | 1,230,620 | ||
Gross margin | 412,380 | ||
Selling and administrative expenses | 620,000 | ||
Net operating loss | $ | (207,620) | |
|
Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per unit and 12,800 units of T500 at a price of $39 per unit. The company’s traditional cost system allocates manufacturing
B300 | T500 | Total | |||||||||
Direct materials | $ | 400,600 | $ | 162,700 | $ | 563,300 | |||||
Direct labor | $ | 120,700 | $ | 42,900 | 163,600 | ||||||
Manufacturing overhead | 503,720 | ||||||||||
Cost of goods sold | $ | 1,230,620 | |||||||||
|
The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $51,000 and $104,000 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) | Overhead | B300 | T500 | Total | |||||||||
Machining (machine-hours) | $ | 211,140 | 90,300 | 62,700 | 153,000 | ||||||||
Setups (setup hours) | 130,380 | 78 | 240 | 318 | |||||||||
Product-sustaining (number of products) | 101,200 | 1 | 1 | 2 | |||||||||
Other (organization-sustaining costs) | 61,000 | NA | NA | NA | |||||||||
Total |
$ | 503,720 | |||||||||||
|
Required
1. Compute the product margins for the B300 and T500 under the company’s traditional costing system. (Do not round your overhead rate. Round your other intermediate and final answers to the nearest whole number.)
|
2. 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.)
|
3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. (Do not round your overhead rate. Round your other intermediate calculations and final answers to the nearest whole number. Round your "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3))
|
|
Trending nowThis is a popular solution!
Step by stepSolved in 8 steps with 6 images
- 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 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Direct materials Direct labor $1,778,500 1,254,584 Hi-Tek produced and sold 60,500 units of B300 at a price of $21 per unit and 12,700 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: Manufacturing overhead Cost of goods sold 523,916 610,000 $ (86,084) 8300 T500 $ 400,700 $ 162,300 $ $ 120,100 $ 42,600 Total 563,000 162,700 528,884 $1,254,584 The company has created an activity-based costing system to evaluate the profitability of its products.…arrow_forwardMemanarrow_forwardHi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income statement for the most recent period is shown below: 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 60,500 units of B300 at a price of $21 per unit and 12,500 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 $ 1,758,000 1,252,580 505,420 550,000 $ (44,580) B300 $ 400,700 $ 120,900 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs)…arrow_forward
- Dengerarrow_forwardJax Incorporated reports the following data for its only product. The company had no beginning finished goods inventory and it uses absorption costing. Sales price $ 57.50 per unit Direct materials $ 10.50 per unit Direct labor $ 8.00 per unit Variable overhead $ 12.50 per unit Fixed overhead $ 1,237,500 per year 1. Compute gross profit assuming (a) 75,000 units are produced and 75,000 units are sold and (b) 110,000 units are produced and 75,000 units are sold.2. By how much would the company’s gross profit increase or decrease from producing 35,000 more units than it sells?arrow_forwardHi-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 B300 at a price of $20 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 $ 1,703,300 1,236,624 466,676 560,000 $ (93,324) Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total…arrow_forward
- JART manufactures and sells underwater markers. Its contribution margin income statement follows. Contribution Margin Income Statement For Year Ended December 31 Per Unit Annual Total Sales (420,000 units) $ 7.00 $ 2,940,000 Variable costs Direct materials 1.46 613,200 Direct labor 0.44 184,800 Variable overhead 0.70 294,000 Contribution margin 4.40 1,848,000 Fixed costs Fixed overhead 0.30 126,000 Fixed general and administrative 0.25 105,000 Income $ 3.85 $ 1,617,000 A potential customer offers to buy 52,000 units for $3.70 each. These sales would not affect the company’s sales through its normal channels. Details about the special offer follow. Direct materials cost per unit and variable overhead cost per unit would not change. Direct labor cost per unit would be $0.62 because the offer would require overtime pay. Accepting the offer would require incremental fixed general and administrative costs of $5,200. Accepting the offer would require no…arrow_forwardIda Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $840. Selected data for the company's operations last year follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative The absorption costing income statement prepa Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income 0 300 275 25 $ 100 $310 $ 30 $ 35 $ 66,000 $ 31,000 by the company's accountant for last year appears below: $ 231,000 181,500 49,500 40,625 $ 8,875 Required: 1. Under absorption costing, how much fixed manufacturing overhead cost is included in the company's inventory at the end of last year? 2. Prepare an income statement for last year using variable costing.arrow_forwardHi-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 Selling and administrative expenses Gross margin Net operating loss $ 1,651,800 1,211,394 440,406 640,000 $ (199,594) Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per unit and 12,700 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: Direct materials Direct labor Manufacturing overhead Cost of goods sold B300 $ 400,700 $ 162,000 $ 120,200 $ 42,000 T500 Total $ 562,700 162,200 486,494 $ 1,211,394 The company has created an activity-based costing system to evaluate the profitability…arrow_forward
- Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income state for the most recent period is shown below: 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 60,300 units of B300 at a price of $20 per unit and 12,500 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 labo 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 $ 1,706,000 1,221,008 484,992 570,000 $ (85,008) Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead…arrow_forwardIndigo Chance Co. sells computers and video game systems. The business is divided into two divisions along product lines. Variable costing income statements for the current year are presented below: Computers VG Systems Total Sales $720,000 $480,000 $1,200,000 Variable costs 504,000 384,000 888,000 Contribution margin $216,000 $96,000 312,000 Fixed costs 255,060 Net income $56,940 (a) Determine the sales mix and contribution margin ratio for each division. Sales mix Computers VG Systemsarrow_forward1arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education