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 1,649,700 ,229,055 Sales Cost of goods sold Gross margin 420,645 Selling and administrative 590,000 expenses Net operating loss $(169,355) Hi-Tek produced and sold 60,300 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 400,900 162,200 T500 Total Direct materials Direct labor Manufacturing overhead Cost of goods sold $ 563,100 20,600 s42,300 162.900 503,055 1,229,055

Explanation / Answer

B300 T500 Total Units 60300 12600 Sales Price 19.00 40.00 Direct Material 400900 162200 563100 Total Manufacturing OH 503055 Direct Labor 120600 42300 162900 Total Direct Labor Dollars 162900 Manufacturing OH 503055 Overhead Per Dollars 3.09 Cost of Goods Sold 1229055 1 B300 T500 2 3.357143 Sales Price 19.00 40.00 6.176243094 10.36727 Less: Direct Material 6.65 12.87 Less: Direct Labor 2.00 3.36 Less: Maufacturing OH 6.18 10.37 (DL Dollars* OHRate) Product Margin 4.18 13.40 17.58 2 B300 T500 Activity Pools Amt B300 T500 Total Per Driver Sales Price 19.00 40.00 Machining 211975 90300 62200 152500 1.39 Less: Direct Material 6.65 12.87 Setups 130380 78 240 318 410 Less: Direct Labor 2.00 3.36 Product Sustaining 100600 1 1 2 50300 Less: Maufacturing OH 3.45 18.66 From Right Side Other 60100 NA NA NA Product Margin 6.91 5.11 Total M OH 503055 Allocation: B300 T500 Machining 125517 86458 (Activity Driver* Rate) Setups 31980 98400 (Activity Driver* Rate) Product Sustaining 50300 50300 (Activity Driver* Rate) Total M OH 207797 235158 Units 60300 12600 B300 T500 Manufacturing OH 3.45 18.66 60300 12600 3 B300 T500 Total Traditional Cost System Amount % Amount % Amount Direct Material 4,00,900 44.85% 1,62,200 48.40% 5,63,100 Direct Labor 1,20,600 13.49% 42,300 12.62% 1,62,900 Manufacturing OH 3,72,427 41.66% 1,30,628 38.98% 5,03,055 Total Cost assigned to products 8,93,927 100.00% 3,35,128 100.00% 12,29,055 Traditional Cost System Amount % Amount % Amount Direct Costs: Direct Material 4,00,900 55% 1,62,200 36.89% 5,63,100 Direct Labor 1,20,600 17% 42,300 9.62% 1,62,900 Indirect Costs: Machining 1,25,517 17% 86,458 19.66% 2,11,975 Setups 31,980 4% 98,400 22.38% 1,30,380 Product Sustaining 50,300 7% 50,300 11.44% 1,00,600 Total Cost assigned to products 7,29,297 100% 4,39,658 100.00% 11,68,955 Costs not assigned to products: Others 60100 Total Cost 12,29,055

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