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 available with MeGraw-Hill\'s Connect Accounting PRORLEM 7-16 Comparing Traditional and Activity-Based Prodact Marin (O-, LOT- L-4 10- LO14, LO Hi-Tek Manufacturing Inc. makes two types of indastrial componeset parts the 8300 and the T500, An absorpsion costing income statement for the most recent period is shown below H-Tak Manutacturing Inc Income Statemont $2,100,000 Cost of goocs so Gross mangin Seling and administratve expanses Net operating loss 60000) TS00 at a price of S40 per unit. The company\'s traditional cost system allocates manufacturing Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per usit and 37,500 units of asing a plantwide everhead rate and direct labor dollars as the allocation besc Additsional inforenation relating to the company\'s two product lines is shown below: 8300T500 5436,300 $251,700 688,000 Drect mas Oinict labor Manufacturing overthoad or$200,000 $104,000 304,000 08,000 products. Hi-Teks ABC implementation team conchuded that $$0,000 and $100,000 of the oo nature. The ABC team also distri The compasy has created an activity-based costing system to evaluate the expenses could be directly manufacturing overhcad to four activities as shows belowa traced to B300 and T500, respectively. The remainder of the selling and administrative expenses was organization-sustaining in Actvity Activity Cost Pool (and Activity Measur) $213.500 9000062.500 12,500 157,500 300 37 Setups (sebup hours)

Solution

Problem 7-16. Answer 1. Calculation of Product Margin Under Traditional Costing System B300 T500 Total Sales in Units              70,000           17,500 SP per Unit                       20                    40 Sales in $        1,400,000         700,000        2,100,000 Less: Costs Direct Materials            436,300         251,700            688,000 Direct Labor            200,000         104,000            304,000 Manufacturing Overhead            400,000         208,000            608,000 Total Maufacturing Cost        1,036,300         563,700        1,600,000 Product Margin            363,700         136,300            500,000 Predetermined Overhead Rate = $608,000 (Total MOH) / $304,000 (Total Direct Labour $) Predetermined Overhead Rate = $2.00 per DL$ Answer 2. Calculation of Activity Rate Total cost Allocation Base Allocation Rate Machining            213,500         152,500 Mach. Hrs              1.40 per mach. Hr Setups            157,500                 375 Setup Hrs          420.00 per setup hr. Product Sustaining            120,000                      2 Production    60,000.00 per product Other            117,000 NA NA Total Overhead            608,000 Calculation of Product Margin Under ABC Costing B300 T500 Total Sales in Units              70,000           17,500 SP per Unit                       20                    40 Sales in $        1,400,000         700,000        2,100,000 Less: Costs Direct Materials            436,300         251,700            688,000 Direct Labor            200,000         104,000            304,000 Advertising Costs              50,000         100,000            150,000 Indirect Costs: Machining            126,000           87,500            213,500 Setups              31,500         126,000            157,500 Product Sustaining              60,000           60,000            120,000 Total costs assigned to products            903,800         729,200        1,633,000 Product Margin            496,200         (29,200)            467,000 Answer 3. B300 T500 Total Amount Amount % of Total amount Amount % of Total amount Traditional Cost System Direct Materials            436,300 63.42%            251,700 36.58%              688,000 Direct Labor            200,000 65.79%            104,000 34.21%              304,000 Manufacturing Overhead            400,000 65.79%            208,000 34.21%              608,000 Total cost assigned to products        1,036,300 64.77%            563,700 35.23%          1,600,000 Selling & Admn. Exp.              550,000 Total Costs          2,150,000 B300 T500 Total Amount Amount % of Total amount Amount % of Total amount Activity Based Costing system Direct Materials            436,300 63.42%            251,700 36.58%              688,000 Direct Labor            200,000 65.79%            104,000 34.21%              304,000 Advertising Costs              50,000 33.33%            100,000 66.67%              150,000 Indirect Costs: Machining            126,000 59.02%              87,500 40.98%              213,500 Setups              31,500 20.00%            126,000 80.00%              157,500 Product Sustaining              60,000 50.00%              60,000 50.00%              120,000 Total costs assigned to products            903,800 55.35%            729,200 44.65%          1,633,000 Costs not assigned to products Selling & Admn. Exp.              400,000 Other Costs              117,000 Total Costs          2,150,000