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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
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 $1,320. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Royale Majestic Direct materials $600 $400 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($40 per DLH) 240 200 Total per unit cost $960 $700 In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of s40 per direct labor hour was determined by dividing total estimated manufacturing overhead of $7,922,700 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $620 ($1,580 - $960) and Majestic $620 ($1,320 - $700). 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 $1,267,200 39,600 $32/order Machine setups Number of setups 943,500 18,500 $51/setup Machining Machine hours 4,952,800 120,800 $41/hour Quality control Number of inspections 759,200 29,200 $26/inspection 3 Total The cost drivers used for each product were: Cost Drivers Royale Purchase orders 17,000 Machine setups 5,000 Machine hours 75,000 Inspections 11,000 Majestic 22,600 13,500 45,800 18,200 39,600 18,500 120,800 29,200 Y Assign the total 2020 manufacturing overhead costs to the two products using activity-based costing (ABC) and determine the overhead cost per unit (Round cost per unit to 2 decimal places, c.9. 12.25.) Royale Majestic Total assigned costs Cost per unit 1 Calculate cost per unit of each model using ABC costing (Round answers to 2 decimal places, e.. 12.25.) Royale Majestic Cost per unit
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