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PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins [LO1, LO3, L04. I Hi-Tek Manuf


PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins [LO1, LO3, L04. I Hi-Tek Manufacturing Inc. makes two t Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17500 units of T500 at a price of $40 per unit. PROBLEM 7-17 Comparing Traditional and Activity-Based Product Margins [LO1, LO3, L04. I Hi-Tek Manufacturing Inc. makes two types of industrial component parts-the B300 and T500. An absorption costing income statement for the most recent period is shown below Hi-Tek Manufacturing Inc. Income Statement Sales $2,100,000 Cost of goods sold Gross margin... Selling and administrative expenses 1,600,000 500,000 550,000 $ (50,000) Net operating loss Hi-Tek produced and sold 70,000 units of B300 at a price of $20 per unit and 17500 units of T500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overbead to products using a plantwide overhead rate and direct labor dollars as the allocation base. Addi- Activity Based Costing: A Tool to Aid Decision Making tional information relating to the company's two product lines is shown below: 8300 Direct materials T500 Direct labor Manufacturing overhead ... Cost of goods sold $436.300 Total $251,700 $200,000 $104,000 $ 688.000 304.000 608.000 $1,600,000 The company has created an ucts. Hi-Tek's ABC implementation team concluded that $50,000 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 distributed the company's manufacturing overhead to four activities as shown below activity-based costing system to evaluate the profitability of its prod- organization-sustaining in nature. The ABC team also Activity Manufacturing Overhead Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead cost... B300 T500 Total 90,000 62,500 300 152,500 $213,500 157,500 375 75 2 1 120,000 NA NA NA 117,000 $608,000 IUsing Exhibit 7-12 as a guide, compute the product margins for the B300 and T500 under the company's traditional costing system. 2Using Exhibit 7-10 as a activity-based costing system. Required: 3 Using Exhibit 7-13 as a guide, prepare a quantitative comparison of the traditional and activity-hased cost assignments. Explain why the traditional and activity-hased cost assignments differ guide, compute the product margins for B300 and T500 under the PROBLEM 7-18 Comparing Traditional and Activity-Based Product Margins (LO1, LO3, L04, LO5) Smoky Mountain Corporation makes two types of hiking boots-Xtreme and the Pathfinder. Data concerning these two product ines appear below: Pathfinder Xtreme $99.00 L00

 

Apr 08 2020 View more View Less

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