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Sunland Electronics manufactures two ultra-high-definition television models: the Royale, which sells for $1,630, and a new model, the Majestic, which sells for $1,270. The production
Sunland Electronics manufactures two ultra-high-definition television models: the Royale, which sells for $1,630, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2022 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($40.676 per DLH) Total per unit cost Royale $600 120 244 $964 Majestic $430 100 203 $733 In 2022, Sunland manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40.676 per direct labor hour was determined by dividing total estimated manufacturing overhead of $8,135,200 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $666 ($1,630 - $964) and Majestic $537 ($1,270 - $733). 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 Sunland'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.
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