2. Austin Electronics manufactures two large-screen television models: the Royale, which sells for $1,600, and a new model, the Majestic, which sells for $1,300. Few per unit cost data are given: Traditional Costing DM DL ($20 per hour) MOH ($38 per DLH) Royale $700 $120 $228 Majestic $420 $100 $190 In 2017, Austin manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $76 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,600,000 by the total direct labor hours (100,000) for the two models. Under traditional costing, the gross profit on the models was Royale $552 or ($1,600 - $1,048), and Majestic $590 or ($1,300 - $710). 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 Austin'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, 2017. Activities Cost Est. Overhead Activity Drivers Cost (5) Level No. of orders 1,200,000 20,000 No. of setups 900,000 9,000 Activity Rate ?? ?? Purchasing Machine Setups Machining 4.800,000 ?? 60,000 Machine hours No. of inspections 700,000 ?? Quality Control 14,000 Royale Majestic Total Activity Level 20,000 8,500 11,500 Cost Drivers Purchasing Machine Setups Machining Quality Control 6,500 9,000 2,500 37,500 22,500 60,000 5,500 8,500 14,000 Required (15 Marks) a) Calculate the activity rates for all the activity cost pools. b) Assign the total 2017 manufacturing overhead costs to the two products using activity based costing (ABC) and determine the overhead cost per unit. c) What was the cost per unit and gross profit of each model using ABC? d) Explain the difference between the cost figures of Traditional and ABC system