REQUIRED: 1. Compute the product margins for the B300 and T500 under the company’s traditional costing…
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Question “REQUIRED: 1. Compute the product margins for the B300 and T500 under the company’s traditional costing…”
REQUIRED:
1. Compute the product margins for the B300 and T500 under the
company’s traditional costing system.
2. Compute the product margins for the B300 and T500 under the
activity-based costing system.
3. Prepare a quantitative comparison of the traditional and
activity-based cost assignments.
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 $ 1,651,600 1,237,474 414,126 590,000 $ (175,874) Hi-Tek produced and sold 60.400 units of B300 at a price of $19 per unit and 12,600 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 T500 Total $ 400,200 $ 162,200 $ 562,400 $ 120,200 $ 42,800 163,000 512,074 $ 1,237, 474 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $60,000 and $102,000 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 Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead.cost Manufacturing Overhead $ 210,864 140,610 100,400 60,200 $ 512,074 Activity B300 T500 Total 90,300 62,500 152,800 77 250 327 1 1 1 2 NA NA NA < Prev Ranufacturing overhead cost 6 of 6 RB20 $ 512,604 RE Propierea unitate comparson of the vadonal and the cost Required 1 Compute the product margins for the 1300 and 500 under the company stronal conting site 2. Compute the product margins for 300 and 500 under the based on 3. Prepare a quantitative comparison of the traditional and activity based cost assignments Cathewwertetal be Required: 1 Compute the product margins for the 3300 and 1500 under the com 2. Compute the product margins for 300 and 1500 under the activity 2. Prepare a quantitate comparison of the traditional and activity base para gerture comparison of the actors and animats Rounder paces de plante Complete this question by your news in the tabs Complete this question by entering your answer the Required 1 Red 2 Required Compute the product margins for the 100 and 500 under the company traditional tour Intermediate clations to decimal places and swers to the newest whole dolar) Required 1 rokered Required 3300 1500 Products 5 Compute the product marging for 1000 and T500 under the activity be indicated by a minussige Round your mediat calculation to de BT500 To Product margin 15 Rad 2) < Required Regul < Pur
Answer
Answer to Part 1.: Calculation of Product Margins Using the Traditional Approach: Total 1,147,600 500,000 1,651,600 Sales costs: Direct Materials Direct Labor Manufacturing Cost Applied Total Manufacturing cost 400,200, 120,200, 377,459 898,015 16,2,200 42,800 134.459 339.459 562,400 163,000 512.074 1,237.474 Product Margin 249.585 164,541 414.126 Calculation: Predetermined Rate = $163,000 = 3133,000 * 100 Predetermined overhead Rate = 314.1558%
Answer to Part 2 Estimated Overhead cost Activity 210.864 152.800 MH Activity Rate Machining Hours) 1.38 Per MH Setups 140,610 100.400 327 Setups 2.430 per Setups 50,200 50,200 162,324 162,400 42,800 102,000 Product Calculation of Product Margin using Activity Based Costing: B300 T500 Total 1,147.600 504,000 1,651,600 1,651,600 1,651,600 1,651,600 1,339,400 1,339.
To Part 3. Answer to Part 3.
Total B300% of Total Anmount T500% of Total Total Amount Amount 400,000. 71.16% 73.74% 36.4% 32,200 42,800 102,000 28.84% 26.26 26.26% 62.96% 562,400 160,000. 162,000 Activity-Based Costing System. Direct Costs Direct Materials Direct Labor Advertising Expense Indirect costs: Product Sustaining Total Cost: Products Direct Materials Direct Labor Batch Setups Supporting Direct Labor 140,610 100.400 1,339.274 60,200 1,399.
Conclusion
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