Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300

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 below Hi-Tek Manufacturing Inc Income Statement Sales Cost of goods sold $1,708,000 1,253,884 Gross margin Seling and administrative expenses 454,116 550,000 Net operating loss $ (95,884) Hi-Tek produced and sold 60,200 units of B300 at a price of $20 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 $ 400,600 162,200 $ 562,800 162,700 528,384 $120,600 42,100 Cost of goods sold $1,253,884

Explanation / Answer

1. Contribution marginusing Tradittional costing

2. Contribution margin as per ABc costing

B300 T500 Sales 1204000 504000 Less: Costs Material cost 400600 162200 Labour cost 120600 42100 Manufacturing overhead 391660 136724 Contribution margin 651140 1629765

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