D Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,800, and a new model, the Majestic, which sells for $1,500. The production cost computed per unit under traditional costing for each model in 2014 was as follows Traditional Costing Royale Majestic Direct materials $ 800 $ 420 Direct labor ($20 per hour) 120 100 Manufacturing overhead (538 per DIH) 228 190 5 1,1485 710 In 2014, Schultz manufactured 25.000 units of the Royale and 10,000 units of the Majestic The overhead rate of $38 per direct labor hour was determined by dividing the total expected manufacturing overhead of 57,600,000 by the total direct labor hour (200,000) for the two models Under traditional costing the gross profit on the models was Royale 5652 or $1,000 $1,148), and Majestic $790 or $1,500 - 5710). 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 Schulte'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, 2014 Expected Estimated use of Cortes Overhead Cost Babes Purchasing No. of orders 1,400,000 40,000 Machine setups No. of setups 360,000 18,000 Machining Machine hours 4,800,000 120,000 Quality control No. of Inspections 700,000 28,000 Activity Based Queshead Bate per order per setup per hour Loer inspection The cost drivers for each product were: + Total Cost Rivers Purchase orders Machine setups Machine hours Inspections Royale 17,000 5,000 75,000 11,000 Majestic 23,000 13,000 45,000 17,000 40,000 18.000 120,000 28,000 (a) Assign the total 2014 manufacturing overhead costs to the two products using activity based costing (ABC) and determine the overhead cost per unit. What was the cost per unit and gross profit of each model using ABC costing? Are management's future plans for the two models sound? Explain. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". (a) Royale Drivers used Majestic Cost Drivers used Cost Total Cost Assigned Cost Driver Purchase orders Machine setups Machine hours Inspections Total costs assigned Units produced Overhead Cost per Unit Boyale Majestic Direct materials Direct labor Manufacturing overhead Total Cost per unit Sales price per unit Cost per unit Gross profit per unit Answers in yellow box below