B & B Electronics Company manufactures two large-screen television models: the Deluxe, which has been produced for many years and sells for $1,000, and the Flat, a new model, which sells for $1,270. Based on the following income statement for 2020, the CFO at B & B has decided to concentrate the marketing resources on the Flat model and to begin to phase out the Deluxe model. Total B&B ELECTRONICS COMPANY Income Statement Year Ended December 31, 2020 Flat Deluxe Sales $ 5,080,000 $ 22,000,000 Cost of goods sold 3,600,000 13,860,000 Gross margin 1,480,000 8,140,000 Selling and administrative expenses 912,000 5,918,000 Net profit $ 568,000 $ 2,222,000 Units produced and sold 4,000 22,000 Net profit per unit sold $142 $101 $ 27,080,000 17,460,000 9,620,000 6,830,000 $ 2,790,000 The standard unit costs for the Flat and Deluxe models are as follows: Flat Deluxe Direct materials $630 $200 70 30 Direct labour: Flat (3.5 hrs. * $20/hr.) Deluxe (1.5 hrs. * $20/hr.) Machine usage: Flat (4 hrs. * $25/hr.) Deluxe (8 hrs. * $25/hr.) Manufacturing overhead Standard cost 100 200 100 200 $900 $630 Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. B & B's CFO is in favour of using an activity-based costing system and has gathered the following information about the company's manufacturing overhead costs for 2020: Units of the Cost Driver Flat Activity Centres and Cost Drivers Soldering (number of solder joints) Shipments (number of shipments) Quality control (number of inspections) Purchase orders (number of orders) Machine power (machine hours) Machine set-ups (number of set-ups) Total traceable costs Activity Costs $ 960,000 744,000 1,215,000 825,000 96,000 960,000 $ 4,800,000 300,000 4,400 21,000 114,000 16,000 4,000 Deluxe 1,300,000 14.200 60,000 51,000 Total 1,600,000 18,600 81,000 165,000 192,000 10,000 176,000 6,000 Using activity-based costing, calculate the gross margin for Flat model and Deluxe model. (Round per machine hour to 5 decimal places, e.g. 15.21156, other intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to 2 decimal places, e.g. 15.25%.) Flat Deluxe Gross margin % % Using activity-based costing, determine whether B & B Electronics should continue to emphasize the Flat model and phase out the Deluxe model. B & B Electronics with its plans to emphasize the Flat model and phase out the Deluxe model