Final answer:
The key components of Hi-Tek Manufacturing's absorption costing income statement are sales, cost of goods sold, and operating income. Sales are linked to product demand, COGS includes all direct production costs, and operating income is sales minus COGS and operating expenses.
Step-by-step explanation:
Analyzing the absorption costing income statement of Hi-Tek Manufacturing requires breaking down its key components such as sales, cost of goods sold (COGS), and operating income. Sales represent the revenue generated from the firm's products, which, as stated, is a function of the demand for those products. The cost of goods sold includes all the costs that are directly related to the production of the components B300 and T500, including direct labor, materials, and overhead costs that are 'absorbed' by the produced units. Operating income, therefore, is calculated by subtracting COGS and any operating expenses from sales revenue.
It is important to note that total cost encompasses not only these direct production costs but also indirect costs such as selling and administrative expenses. Furthermore, the text hints at the distinction between short run costs, which include fixed and variable costs within a specific period, and long run costs, which pertain to a longer timeframe where all costs are considered variable.