50.1K

Verified Solution

Link Copied!

Hi$-$Tek Manufacturing, Incorporated, makes two types of industrial component parts$-$the B$300$ and the T$500.$ An absorption costing income statement for the most recent period is shown:

The company has created an activity$-$based costing system to evaluate the profitability of its products. Hi$-$Tek's ABC implementation team concluded that $$50,000$ and $$100,000$ of the company's advertising expenses could be directly traced to B$300$ 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:

$\backslash$table$[[$Activity Cost Pool $($and Activity Measure$),\backslash$table$[[$Manufacturing$],[$Overhead$]],$Activity$],[8300,$T$500,$Total$],[$Machining $($machine$-$hours$),$$$213,500,90,000,62,500,152,500],[$Setups $($setup hours$),157,500,75,300,375],[$Product$-$sustaining $($number of products$),120,000,1,1,2],[$other $($organization$-$sustaining costs$),117,000,$NA$,$NA$,$NA$],[$Total manufacturing overhead cost,$$608,000,,,]]$

Required:

Compute the product margins for the $B300$ and $T500$ under the company's traditional costing system.

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

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

Complete this question by entering your answers in the tabs below.

Answer & Explanation Solved by verified expert

See Answer