Jacobson Electronics manufactures two HD television models: the Royale, which sells for $1,400, and a new model,

Question:

Jacobson Electronics manufactures two HD television models: the Royale, which sells for $1,400, and a new model, the Majestic, which sells for $1,100. The production costs calculated per unit under traditional costing for each model in 2016 were as follows:

In 2016, Jacobson manufactured 20,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $35 per direct labour hour was determined by dividing total expected manufacturing overhead of $4.9 million by the total direct labour hours (140,000) for the two models.
Under traditional costing, the gross profit on the models was $525 for the Royale or ($1,400 2 $875), and $560 for the Majestic or ($1,100 2 $540). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model.
Before finalizing its decision, management asks Jacobson's controller to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2016:

The cost drivers used for each product were as follows:

Instructions
(a) Assign the total 2016 manufacturing overhead costs to the two products using activity-based costing(ABC).
(b) What was the cost per unit and gross profit of each model using ABC costing?
(c) Are management's future plans for the two models sound? Explain.