Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the B3

Question

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 s 1,653,500 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss 1,201,309 452,19.1 630,000 (177,809) Hi-Tek produced and sold 60,500 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: B300 T500 Total Direct materials Direct labor Manufacturing overhead Cost of goods sold 400,900 163,000 563,900 163,400 474,009 $ 1,201,309 $ 120,800 42,600 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 $107,000 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:

Explanation / Answer

Q1 is not complete Q2 - Answer is as below Statement showing computations Particulars Amount a Activity Driver No of Activity b Cost per activity c= a/b No of Activity of Hubs d Cost Allocated to Hubs c*d No of Activity of Sprockets e Cost Allocated to Sprockets c*e Machine setups               25,515.00 Setups                       243.00                           105.00                   135.00                 14,175.00            108.00         11,340.00 Special processing            162,000.00 Machine hours                    3,600.00                             45.00               3,600.00               162,000.00                     -                          -   General factory            177,000.00 DL hours                 24,000.00                               7.38             13,800.00               101,775.00      10,200.00         75,225.00 Total Overhead            364,515.00               277,950.00         86,565.00 No of units                 23,000.00         51,000.00 Cost per unit                          12.08                   1.70 Paticulars Hubs Sprockets Direct Materials                       39.00                      17.00 Direct Labour Hubs = 17*.60 Sprockets = 17*.20                       10.20                        3.40 Overhead                       12.08                        1.70 Unit Cost                       61.28                      22.10

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