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

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1 Product margin under traditional system is B300 T500 Total A No. of units 60,300 12,600 72,900 B Sale price per unit 19 40 C=A*B Sale Value 1,145,700 504,000 1,649,700 D Direct Material 400,900 162,200 563,100 E Direct Labor 120,600 42,300 162,900 F=D+E Total Direct Costs 521,500 204,500 726,000 G Manufacturing Overhead 372,427 130,628 503,055 H =F+G Total Product Cost 893,927 335,128 1,229,055 I=C-H Product Margin 251,773 168,872 420,645

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