1 Please explain what this problem is asking for 2 How would

1) Please explain what this problem is asking for?

2) How would you go about solving, what formulas or setups do you need to use?

3) Solve the problem in an excel sheet

4) What dose your answer mean and commentary on what you did/how you did it.

Thank you.

All applicable problems are avallable with MeGraw.Hill\'s Connecr Acounting PROBLEM 7-16 Comparing Traditional and Activityllased Product Marg-nona,LOALLO14, L Hi-Tek Manufacturing Inc. makes two types of indastrial component parts-the 1B300 and the TS00. An absorption costing income statement for the most rocest period is showm below Hi-Tok Manufecturing Inc Income Statomont Sales $2,100,000 Cost of oods sod Gross margn 100.0 500,000 60,000 Net operating lons 80.000 Hi-Tek produced and sold 70,000 units of 8300 at a price of $20 per unit and 17,500 units of 1500 a price of $40 per unit. The company\'s traditional cost system allocaees manufacturing overhead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Additiocal inonation elaie to the company\'s two product lines is shown below 8300 T500Total 436 300 201,200 6000 Drect materials . ·.. Diract labor Manufacturng ovarnend Cost of goods soleH 2000$104.000 04,000 008,000 $1,600,000 team concluded that $50,000 and $100,000 of the compuny\'s advertising nature. The ABC team also distmibuted the company\'s created an activity-based costing system to evaluate the protitability of The company has expenses could be diroctly traced to B300 and T500, respectively. The remainder of the w manufacturing overhead to four activities as shown below: tly traced to B300 and T500, respectively. The remainder of the seling and administrative expenses was organiration-sustaining in Manufacturing Overhoad 8300 T50O o Activity Cost Pool jand Activity Moasure 213,500 90,000 62.50012.500 157,500 75 30037 Setupe (setup hours)

Solution

As per policy, only one question is allowed to answer, so answering 7-16 :

7-16)

1. The product margin of B300 & T500 on predetermined basis :

2> Distribution of Manufacturing Overhead as per ABC:

The product margin of B300 & T500 on ABC basis :

3. The qualitative comparison of the traditional and ABC costing, the product magin is higher under the ABC basis than Traditional basis because the common organisational expenses are not distributed among the jobs due to absence of the basis of distribution.

	B300	T500
DM	$436300	251700
DL	200000	104000
Manuf O/H (608000/304000)	400000	208000
COGS	$1036300	563700
Sales(70000*20 & 17500*40)	1400000	700000
Margin	$363700	$136300