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P5.37A (LO 2) Jacobson Electronics manufactures two I-ID television models: the Royale, which sells for $1,400, and a new model, the Majestic, which sells for $1,100. The production costs calculated per unit under traditional costing for each model in 2020 were as follows: Traditional Costing Royale Majestic Direct materials $600 $320 Direct labour ($20 per hour) 100 80 Manufacturing overhead ($35 per direct labour hour) E A Total per-unit cost $875 $540 In 2020, Jacobson manufactured 20,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $35 per direct labour hour was determined by dividing total estimated manufacturing overhead of $4.9 million by the total direct labour hours (140,000) for the two models. Under traditional costing, the gross prot on the models was $525 for the Royale (or $1,400 $875), and $560 for the Majestic (or $1,100 $540). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model. Before nalizing its decision, management asks J acobson's controller to prepare an analysis using activity-based costing (AB C). The controller accumulates the following information about overhead for the year ended December 31, 2020: Activity Cost Purchasing Machine set-ups Machining Quality control Estimated Cost Drivers Overhead Number of orders $ 750,000 Number of set-ups 600,000 Machine hours 3,100,000 Number of 450,000 inspections The cost drivers used for each product were as follows: Instructions Cost Drivers Roxale Purchase orders 1 1,250 Machine set-ups 10,000 Machine hours 40,000 Inspections 2,250 Estimated Use of Cost 100,000 Majestic 13.750 10,000 60,000 2,750 5,000 Total 25,000 20,000 1 00,000 5,000 Activity-Based Overhead Rate $30 per order 30 per set-up 31 per hour 90 per inspection Instructions a. Assign the total 2020 manufacturing overhead costs to the two products using activity-based costing (ABC). a. Royale $2,080,000 b. What was the cost per unit and gross prot of each model using ABC costing? b. Cost/unitRoyale $804 c. Are management's future plans for the two models sound? Explain