Sheridan 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 2025 was as follows. Traditional Costing Royale Majestic Direct materials $660 $400 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($40.225 per DLH) 241 201 Total per unit cost $1,021 $701 In 2025, Sheridan manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40.225 per direct labor hour was determined by dividing total estimated manufacturing overhead of $8,045,000 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $559 ($1,580 - $1,021) and Majestic $619 ($1,320 - $701). 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 Sheridan'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, 2025. Activity-Based Overhead Rate Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Purchasing Number of orders $1,308,800 40,900 $32/order Machine setups Number of setups 936,000 18,000 $52/setup Machining Machine hours 5,069,400 120,700 $42/hour Quality control Number of inspections 730,800 26,100 $28/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 18,000 22,900 40,900 Machine setups 5,000 13,000 18,000 Machine hours 76,000 44,700 120,700 Inspections 10,000 16,100 26,100