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OB Electronics manufactures two home theatre systems: the Xtra which sells for $2,400, and a new model, the Preferred, which sells for $2,000. The production

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OB Electronics manufactures two home theatre systems: the Xtra which sells for $2,400, and a new model, the Preferred, which sells for $2,000. The production cost computed per unit under traditional costing for each model in 2017 was as follows. In 2017, OB manufactured 40,000 units of the Xtra and 60,000 units of the Preferred. The overhead rate of $17.50 per direct labor hour was determined by dividing total expected manufacturing overhead of $4,900,000 by the total direct labor hours (280,000) for the two models. Under traditional costing, the gross profit on the models was: Xtra $1,625 or ($2,400$775), and Preferred $1,430 or ($2,000$570). Because of this difference, management is considering phasing out the Xtra model and increasing the production of the Preferred model. Before finalizing its decision, management asks Oscar'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. The cost drivers used for each product were: Requirement (a) Assign the total 2017 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

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