HiTek Manufacturing Inc makes two types of industrial compon

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 produced and sold 60,400 units of B300 at a price of $21 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:

The company has created an activity-based costing system to evaluate the profitability of its products. Hi-Tek’s ABC implementation team concluded that $59,000 and $100,000 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:

Required:

1. Compute the product margins for the B300 and T500 under the company’s traditional costing system.

2. Compute the product margins for B300 and T500 under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Hi-Tek Manufacturing Inc. Income Statement
Sales	$	1,759,800
Cost of goods sold		1,233,135
Gross margin		526,665
Selling and administrative expenses		590,000
Net operating loss	$	(63,335	)

Required 1. Compute the product margins for the B300 and T500 under the company\'s traditional costing system. 2. Compute the product margins for B300 and T500 under the activity-based costing system. 3. Prepare a quantitative comparison of the traditional and activity-based cost assignments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the product margins for the B300 and T500 under the company\'s traditional costing system. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.) 8300 T500 Total Product margin Required 1 Required 2>

Solution

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Manufacturing Overhead	=	$ 507,135.00
Direct labor	=	$ 163,200.00
Overhead Rate	=	$               3.11