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 Gross margin Selling and administrative expenses Net operating loss 1,241,270 460, 730 560, 000 $ (99,270) Hi-Tek produced and sold 60,100 units of B300 at a price of $20 per unit and 12,500 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: T500 Total B39 $4,400 Direct materials Direct labor Manufacturing overhead Cost of goods sold $162,800 $120, 800 42,100 $ 563,2 162, 900 515,170e $1, 241, 270

Explanation / Answer

1 Manufacturing overhead rate = 515170/162900 3.162 B300 T500 Total Sales 1202000 500000 1702000 Cost of goods sold Direct material 400400 162800 563200 Direct labor 120800 42100 162900 Manufacturing overheads 382029 133141 515170 (120800*3.162) (42100*3.162) Total cost of goods sold 903229 338041 1241270 Product margin 298771 161959 460730 Selling and administrative 560000 Net operating Loss -99270 ABC Total cost Total cost driver Cost per driver B300 T500 Total Machining cost 214620 153300 1.4 126560 88060 214620 Setup cost 139950 311 450 31950 108000 139950 Product sustaining 100600 2 50300 50300 50300 100600 Other cost 60000 515170 ABC B300 T500 Total Sales 1202000 500000 1702000 Cost Direct material 400400 162800 563200 Direct labor 120800 42100 162900 Machining cost 126560 88060 214620 Indirect cost Setup cost 31950 108000 139950 Product sustaining 50300 50300 100600 Advertising 60000 102000 162000 Total cost 790010 553260 1343270 Product margin 411990 -53260 358730 Other cost 60000 Other selling and admin 398000 Net operating loss -99270

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