Problem 4-2A Schulz Electronics manufactures two ultra high-denition television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional cosng for each model in 2017 was as follows. Traditional Costing RDEIE Majestic Direct materials $ 700 $ 420 Direct Labour ($20 per hour) 120 100 Manufacturing overhead [$38 per DLH] 228 190 Total per unit cost M $210 In 2017 Schulz manufactured 25,000 units of Royale and 10,000 units of the Majestic. The overhead rate of $38 per direct labour hour was determined by divinding total expected manufacturing overhead of $7,600,000 by the total direct labour hours (200,000) for the two models . Under traditional costing, the gross prot on the models was Royale $552 [$1,600 - $1,048) and Majestic $590 ($1,300 $710). Because of this difference, management is considering phasing out the Royale model and increasing production ofthe Majestic model. Before nalizing its decision, management asks Schulz'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. Expected Activity-Based Activity Estimated use of Overhead Costs Pools Cost Drivers overhead Drivers m Purchasing Number of Orders $1,200,000 40,000 $30/order Machine Setups Number of setups 900,000 18,000 $50/setup Machining Machine hours 4,800,000 120,000 $40! hour Quality Control Number of Inspections 700,000 28,000 $25nspection The cost drivers used for each product were: Cost Drivers ROEIE Majestic l3) Purchase orders 17,000 23,000 40,000 Machine setups 5,000 13,000 18,000 Machine hours 75,000 45,000 120,000 Inspections 11,000 17,000 28,000 Instructions (a) Assign the total 2017 manufacturing overhead costs to the two products using activitybased costing (ABC) and determine the overhead cost per unit. (b) What was the cost per unit and gross prot of each model using ABC? (c) Are management's future plans for the two models sound? Explain. - Management's future plan not sound . Under ABC, Royale model's profit is more than Majectic's by $195.10 ($618.60 $423.50) . Majestic supposed to be phased out Use of ABC can assist the management to reduce Majestic's costs and improve its prot