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 Sales Cost of goods sold Oross margin Selling and administrative expenses Net operating loss $ 1,635, 200 1,235,307 399,893 600,000 (200,107) Hi-Tek produced and sold 60,200 units of B300 at a price of $19 per unit and 12,600 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 401,000 T500 Total Direct materials Direct labor Manufacturing overhead Cost of goods sold 162,500 $563,500 162,300 509,507 1,235, 307 $ 120,100 42,200 The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek's ABC implementation team concluded that $53,000 and $105,000 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 alsco distributed the company's manufacturing overhead to four activities as shown below:

Explanation / Answer

Solution 1:

Solution 2:

Solution 3:

Overhead Allocation - Traditional Costing System Particulars B300 T500 Total Estimated annual Production (In units) 60200 12600 Direct Labor Cost $120,100 $42,200 $162,300 Overhead Cost Allocation basis direct labour dollar (Overhead / Total direct labor dollar * Labor dollar of model) $377,029 $132,478 $509,507 Manufacturing overhead cost per unit (Allocated Overhead / Nos of units) $6.26 $10.51

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