Question $3$

PF$.2(\{$:$L{O}_2),$ AP Writing Schultz Electronics manufactures two ultra high$-$definition 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 costing for each model in $2022$ was as follows.

In $2022,$ Schultz manufactured $25,000$ units of the Royale and $10,000$ units of the Majestic. The overhead rate of $$38$ per direct labor hour was determined by dividing total

estimated manufacturing overhead of $$7,600,000$ by the total direct labor hours $(200,000)$ for the two models.

Under traditional costing, the gross profit 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 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 $31,2022.$

What is the cost per unit and gross profit of each unit based on:

A$.$ A single overhead pool, where all of the overheads are allocated evenly to each unit.

B$.$ Activity Based Costing, where costs are allocated based on multiple cost drivers