Hi. Tek Manufacturing Inc, makes two types of industrial component parts -the 83

Question

Hi. Tek Manufacturing Inc, makes two types of industrial component parts -the 8300 and the T500 An absorption cosing income statement fer the most recent period is shown below Hi-Tok Manufacturing lInc Income Statement Sales Cost of goods sold $1,712.000 1,212,968 Gross margin Seling and administrative expenses 499.032 560,000 Net operating loss s (50,968) HH-Tek produced and sold 60.400 units of 8300 at a price of $20 per unit and 12.600 units of 7500 at a price of $40 per unit. The company's tradtonal cost system alocates manufacturing overhead to products using a plantwide overhead rate and direct labor dolars as the allocation base. Additional infamation relating to the company's two product lines is shown below B300 T500 Deact maneriabs Direct labor Manufacturing overhead 5 400,600 $162200 562,800 5 120,100 42200 162,300 487,888 Cost of goodis sold s 1.212968 The company has created an activity-based costing syatam to evaluate the proitablity of its products. H The remainder of the salling and expenses could be drecty traced to E 300 and T500 administrative expenses was orgarization-sustaining in rature, The ABC team also distributed the company's mandacturing overhead to four acivities as shown bolow Activly Activity Cost Pool (and Actidly Measure) Machning Imachine-hours) Setupa (setup hours) Product-ustaining (number of products) rhed 0T50Total s 205,288 90,400 62,800 153 121,080 100,000 60,700 200 NA NA NA Totl manufacturing cvrhead cost s 087,068 LiFE SAFE 25 "(8200/

Explanation / Answer

1) Margin as per traditional method: B300 T500 Total DM 400600 162200 562800 DL 120100 42200 162300 MO 361020.6 126853.2 487873.8 120100*3.006 42200*3.006 Total costs 881720.6 331253.2 1212973.8 Total revenue 1208000 504000 1712000 Margin 326279.4 172746.8 499026.2 Margin Per Unit 5.40 13.71 2) Manufacturing o/h bifercation: B300 T500 Total Machi 90400*1.34=121136 62800*1.34=84152 205288 205288/153200 setups 77*440=33880 200*440=88000 121880 121880/277 product sustain 50000 50000 100000 other 0 0 60700 Total overhead 205016 222152 Margin as per ABC: B300 T500 Total DM 400600 162200 562800 DL 120100 42200 162300 MO 205016 222152 427168 Total costs 725716 426552 1152268 Total revenue 1208000 504000 1712000 Margin 482284 77448 559732 Margin per unit 7.98 6.15 3) B300 T500 Total amount % amount % amount Traditional cost system DM 400600 0.711798 162200 0.288202 562800 DL 120100 0.739988 42200 0.260012 162300 MO 361020.6 0.739988 126853.2 0.260012 487873.8 Total Cost assigned to products 881720.6 331253.2 1212974 Unallocated 0 Total Costs 1212974 3) B300 T500 Total amount % amount % amount ABC SYSTEM : Direct costs: DM 400600 0.711798 162200 0.288202 562800 DL 120100 0.739988 42200 0.260012 162300 Indirect costs: Machi 121136 0.590078 84152 0.409922 205288 setups 33880 0.277978 88000 0.722022 121880 product sustain 50000 0.5 50000 0.5 100000 Total Cost assigned to products 725716 426552 1152268 Unallocated 60700 Total Costs 1212968

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