2. Compute the product margins for B300 and T500 under the activity-based costin
ID: 2563695 • Letter: 2
Question
2. Compute the product margins for B300 and T500 under the activity-based costing system. (Negative product margins should be indicated by a minus sign. Round your intermediate calculations to 2 decimal places.)
Prepare a quantitative comparison of the activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3) and other answers to nearest whole dollar amounts.)
3.Prepare a quantitative comparison of the activity-based cost assignments. (Round your intermediate calculations to 2 decimal places and "Percentage" answer to 1 decimal place. (i.e. .1234 should be entered as 12.3) and other answers to nearest whole dollar amounts.)
Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and the T500. Arn absorption costing income statement for the most recent period is shown below Hi-Tek Manufacturing Indc. Income Statement Sales Cost of goods sold $1,695,400 1,218,467 Gross margin Selling and administrative expenses 476,933 620,000 Net operating loss $ (143,067) 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 $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 T500 Total Direct materials Direct labor Manufacturing overhead $400,600 162,500 563,100 163,400 491,967 $120,600 42,800 Cost of goods sold $1,218,467 The company has created an activity-based costing system to evaluate the profitability of its products. Hi- Tek's ABC implementation team concluded that $58,000 and $102,000 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
Req 2: Product margin under ABC costing B 300 T 500 Total Amount Amount Amount Sales revenue B300(60200 units @20) 1204000 T500(12600 units@39) 491400 1695400 Less: Product cost assigned-as calculated below 720343 437424 1157767 Less: Cost not assigned 680700 Product margin under ABC costing 483657 53976 -143067 Activity overhead rate Machining activity = Total overhead of activity/ Number of machine hours (203357/152900) = 1.33 per machine hour Setup cost= Total setup activity cost/ number of setup (127510/311) = $ 410 per setup Product sustaining activity = Total overhead of activity / number of products (100,400 /2) = $ 50,200 per porduct Req 3: Quantitative comparison under ABC B 300 T 500 Total Amount % of Total Amount % of Total Amount Machine hours 90100 hours 62800 hours Number of setups 71 setups 240 setups Cost assigned to product Direct material 400600 71.14% 162500 28.86% 563100 Direct labour 120600 73.81% 42800 26.19% 163400 Overhead cost: Machining Activity cost(1.33 per machine hour) 119833 58.93% 83524 41.07% 203357 Setup cost ($410 per setup) 29110 22.83% 98400 77.17% 127510 Product sustaining cost 50200 50.00% 50200 50.00% 100400 Total cost assigned to product 720343 62.22% 437424 37.78% 1157767 Cost not assigned to product Other Activity 60700 Selling & Admin Expense 620,000 TOTAL COST 1,838,467
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