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Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] 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 $ 1,657,500 1,224,620 432,880 620,000 $ (187,120) 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 $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 labo dollars as the allocation base. Additional information relating to the company's two product lines is shown below: B300 T500 Total Direct materials Direct labor $ 400,600 $ 120,400 $ 162,700 $ 42,000 563,300 162,400 498,920 Manufacturing overhead Cost of goods sold $ 1,224,620 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementat ceam concluded that $55,000 and $101,000 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 alsc 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) Overhead B300 T500 Total $ 205,740 131,580 90,100 62,300 230 152,400 306 76

Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] 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 $ 1,657,500 1,224,620 432,880 620,000 $ (187,120) 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 $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 labo dollars as the allocation base. Additional information relating to the company's two product lines is shown below: B300 T500 Total Direct materials Direct labor $ 400,600 $ 120,400 $ 162,700 $ 42,000 563,300 162,400 498,920 Manufacturing overhead Cost of goods sold $ 1,224,620 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementat ceam concluded that $55,000 and $101,000 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 alsc 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) Overhead B300 T500 Total $ 205,740 131,580 90,100 62,300 230 152,400 306 76

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter11: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11.16E
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Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, L07-3, LO7-4, LO7-5] 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 $ 1,657,500 1,224,620 432,880 620,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $4 (187,120) Hi-Tek produced and sold 60,500 units of B3o0 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: в300 T500 Total Direct materials $ 400,600 $ 120,400 $ 162,700 $ 42,000 563,300 162,400 498,920 Direct labor Manufacturing overhead Cost of goods sold $ 1,224,620 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementatic team concluded that $55,000 and $101,000 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) Overhead в300 T500 Total $ 205,740 131,580 90,100 62,300 152,400 306 76 230 %24
Transcribed Image Text:Problem 7-16 (Algo) Comparing Traditional and Activity-Based Product Margins [LO7-1, L07-3, LO7-4, LO7-5] 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 $ 1,657,500 1,224,620 432,880 620,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss $4 (187,120) Hi-Tek produced and sold 60,500 units of B3o0 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: в300 T500 Total Direct materials $ 400,600 $ 120,400 $ 162,700 $ 42,000 563,300 162,400 498,920 Direct labor Manufacturing overhead Cost of goods sold $ 1,224,620 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementatic team concluded that $55,000 and $101,000 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) Overhead в300 T500 Total $ 205,740 131,580 90,100 62,300 152,400 306 76 230 %24
Manufacturing Activity в300 T500 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead Total $ 205,740 131,580 101,600 90,100 62,300 152,400 76 230 306 1 60,000 $ 498,920 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. Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) В300 T500 Total Product margin < Required 1 Required 2 >
Transcribed Image Text:Manufacturing Activity в300 T500 Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead Total $ 205,740 131,580 101,600 90,100 62,300 152,400 76 230 306 1 60,000 $ 498,920 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. Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company's traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) В300 T500 Total Product margin < Required 1 Required 2 >
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