Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $ 1,630, and a new model, the Majestic, which sells for $ 1,320. The production cost computed per unit under traditional costing for each model in 2017 was as follows. Traditional Costing Royale Majestic Direct materials $ 640 $ 430 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($ 43 per DLH) 258 215 Total per unit cost $ 1,018 $ 745 In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $ 43 per direct labor hour was determined by dividing total expected manufacturing overhead of $ 8,552,100 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $ 612 ($ 1,630 $ 1,018) and Majestic $ 575 ($ 1,320 $ 745). 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 Schultzs 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. Activity Cost Pools Cost Drivers Estimated Overhead Expected Use of Cost Drivers Activity-Based Overhead Rate Purchasing Number of orders $ 1,407,000 40,200 $ 35/order Machine setups Number of setups 1,036,800 19,200 $ 54/setup Machining Machine hours 5,306,400 120,600 $ 44/hour Quality control Number of inspections 801,900 29,700 $ 27/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 17,800 22,400 40,200 Machine setups 5,900 13,300 19,200 Machine hours 75,000 45,600 120,600 Inspections 10,700 19,000 29,700

Calculate cost per unit of each model using ABC costing Calculate gross profit of each model using ABC costing