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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. B&B ELECTRONICS COMPANY Income Statement Year Ended December 31, 2020 Flat Deluxe Sales $ 5,080,000 $ 22,000,000 Cost of goods sold 3,560,000 14,300,000 Gross margin 1,520,000 7,700,000 Selling and administrative expenses 956,000 5,434,000 Net profit $ 564,000 $ 2,266,000 Units produced and sold 4,000 22,000 Net profit per unit sold $141 $103 Total $ 27,080,000 17,860,000 9,220,000 6,390,000 $ 2,830,000 The standard unit costs for the Flat and Deluxe models are as follows: Flat $620 Deluxe $220 70 30 Direct materials 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 100 100 $890 200 200 $650 Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. B & B's CFO is in 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: 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 $ 870,000 808,000 1,155,000 760,000 96,000 1,111,000 $ 4,800,000 Units of the Cost Driver Flat Deluxe 330,000 1,120,000 4,700 15,500 20,000 57,000 102,000 50,000 16,000 176,000 4,000 6,000 Total 1,450,000 20,200 77,000 152,000 192,000 10,000 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. should not continue should continue eTextbook and leave