Kimmel, Accounting, 7e Hele 1 System Announcements CALCULATOR PRINTER VERSION 4 BACK NEKT Problem 17-02A a, bl-b2 Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Casting Royale Majestic Direct materials $640 $430 Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) 240 200 Total per unit cost $1,000 $730 120 100 In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40 per direct labor hour was determined by dividing total estimated manufacturing overhead of $7,949,600 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale 5580 ($1,580 - $1,000) and Majestic $540 ($1,270 - 5730). 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 Schultz'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, 2020. Activity Estimated Estimated Use of Activity-Based Cost Pools Cost Drivers Overhead Cost Drivers Overhead Rate Purchasing Number of orders $1,334,400 41,700 $32/order Machine setups Number of setups 894,400 17,200 552/setup Machining Machine hours 4,961,000 121,000 $41/hour Quality control Number of inspections 759,800 26,200 $29/inspection The cost drivers used for each product were Cost Drivers Purchase orders Machine setups Royale 18.000 5,000 Majestic 23,700 12,200 Total 41,700 17,200 Show All MacBook Kimmel, Accounting, 7e Hele 1 System Announcements CALCULATOR PRINTER VERSION 4 BACK NEKT Problem 17-02A a, bl-b2 Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Casting Royale Majestic Direct materials $640 $430 Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) 240 200 Total per unit cost $1,000 $730 120 100 In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40 per direct labor hour was determined by dividing total estimated manufacturing overhead of $7,949,600 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale 5580 ($1,580 - $1,000) and Majestic $540 ($1,270 - 5730). 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 Schultz'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, 2020. Activity Estimated Estimated Use of Activity-Based Cost Pools Cost Drivers Overhead Cost Drivers Overhead Rate Purchasing Number of orders $1,334,400 41,700 $32/order Machine setups Number of setups 894,400 17,200 552/setup Machining Machine hours 4,961,000 121,000 $41/hour Quality control Number of inspections 759,800 26,200 $29/inspection The cost drivers used for each product were Cost Drivers Purchase orders Machine setups Royale 18.000 5,000 Majestic 23,700 12,200 Total 41,700 17,200 Show All MacBook
