HiTek Manufacturing Inc makes two types of industrial compon

Hi-Tek Manufacturing, Inc., makes two types of industrial component parts-the 8300 and the T500. An absorption costing income statement for the most recent period is shown: Sales $ 1,764,000 1,217,287 46,713 550,000 $(3,287) Cost of goods sold Gross margin Selling and administrative expenses Hi-Tek produced and sold 60,000 units of 8300 at a price of $21 per unit and 12,600 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 400,900 162,400 $ 563,300 B300 total Direct Direct labor Manufacturing overhead Cost of goods soled 121,000 42,800 163,800 1,217,287 ability of its products. Hi-Tek\'s ABC implementation The company has created an activity-based costing system to evaluate the profit team concluded that $57,000 and $101,000 of the company\'s advertising expenses could be directly traced to B300 respectively. The remainder of the selling and administrative expense distributed the company\'s manufacturing overhead to four activities as shown below and T500, s was organization-sustaining in nature. The ABC team also Manufacturing overhead 8300 T00 Total ivity Cost Pool (and Activity Measure) $ 200,037 90,300 62,400 152,700 129,150 100,400 77 210 287 Setups (setup hours) Product-sustaining (number of producta ) other (organization-sustaining costs) Total manufacturing overhead cost 60.600 NA NA $ 490, 187

Solution

B 300 T 500 TOTAL Sales $ 1,260,000.00 $ 504,000.00 $ 1,764,000.00 Direct Costs Direct Material $      400,900.00 $ 162,400.00 $      563,300.00 Direct Labour $      121,000.00 $    42,800.00 $      163,800.00 Advertising $        57,000.00 $ 101,000.00 $      158,000.00 Indirect Costs Machine O/H $      118,293.00 $    81,744.00 $      200,037.00 Set up cost $        34,650.00 $    94,500.00 $      129,150.00 Product sustaining $        50,200.00 $    50,200.00 $      100,400.00 Others $        43,285.71 $    17,314.29 $        60,600.00 Margin $      434,671.29 $ (45,958.29) $      388,713.00