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Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Hi-Tek Manufacturing, Inc., makes...

Question

Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Hi-Tek Manufacturing, Inc., makes...

Problem 7-16 Comparing Traditional and Activity-Based Product Margins [LO7-1, LO7-3, LO7-4, LO7-5] Hi-Tek Manufacturing, Inc.Activity Manufacturing Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaRequired 1 Required 2 Required 3 Compute the product margins for B300 and T500 under the activity-based costing system. (NegaTraditional Cost System % Total cost assigned to products Total cost в300 Т500 Total % of % of Amount Amount Total Amount Tot

Problem 7-16 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 Sales 1,749,600 1,233,208 516,392 590,000 (73,608) Cost of goods sold Gross margin Selling and administrative expenses Net operating loss Hi-Tek produced and sold 60,100 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: B300 T500 Total $ 400,000 $ 120,400 163,000 $ $42,400 Direct materials 563,000 162,800 Direct labor Manufacturing overhead 507,408 Cost of goods sold 1,233,208 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $52,000 and $106,000 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:
Activity Manufacturing Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Overhead B300 T500 Total 208,488 136,920 101,200 90,600 62,700 153,300 76 250 326 1 1 60,800 NA NA NA 507,408 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 3 Required 1 Required 2 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.) B300 T500 Total Product margin
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
Traditional Cost System % Total cost assigned to products Total cost в300 Т500 Total % of % of Amount Amount Total Amount Total Amount Amount Activity-Based Costing System Direct costs % % Indirect costs: Total cost assigned to products Costs not assigned to products

Answers

Answers 1 Product Margin under Traditional Costing B300 Product Margin 366052 2 Product Margin under Activity Based costing B3. Quantitative Comparision of the Traditional and Activity Based Cost Assignments Quantitative comparsion of the TraditionalTotal 563000 162800 158000 Quantitative Comparison of Acticity Based Cost Assignments B300 T500 Activty Based Costing System21 Working Notes B300 T500 Total Selling Price 39 Direct Material 400000 163000| 563000 Direct Labor 120400 42400 162800 ProdDetermination of Activity Rate Activty Pool Machining Batch setup Prodcut Sustaining Estimated OH 208488 136920 101200 Base A


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