Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,530, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows.

Traditional Costing		Royale		Majestic
Direct materials		$640		$400
Direct labor ($20 per hour)		120		100
Manufacturing overhead ($41 per DLH)		246		205
Total per unit cost		$1,006		$705

In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $41 per direct labor hour was determined by dividing total estimated manufacturing overhead of $8,114,400 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $524 ($1,530 $1,006) and Majestic $565 ($1,270 $705). 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, 2020.

Activity Cost Pools		Cost Drivers		Estimated Overhead		Estimated Use of Cost Drivers		Activity-Based Overhead Rate
Purchasing		Number of orders		$1,299,200		40,600		$32/order
Machine setups		Number of setups		1,067,000		19,400		$55/setup
Machining		Machine hours		5,035,800		119,900		$42/hour
Quality control		Number of inspections		712,400		27,400		$26/inspection

The cost drivers used for each product were:

Cost Drivers		Royale		Majestic		Total
Purchase orders		17,000		23,600		40,600
Machine setups		6,000		13,400		19,400
Machine hours		75,000		44,900		119,900
Inspections		11,000		16,400		27,400

1) Assign the total 2020 manufacturing overhead costs to the two products using activity-based costing (ABC) and determine the overhead cost per unit.

2) Calculate the cost per unit of each model using ABC costing

3) Calculate gross profit of each model using ABC costing