cel IUI 41,400, and a new model, the Majestic, which sells for $1,100. The production costs unit under traditional costing for each model in 2020 were as follows: Traditional Costing Royale Majestic Direct materials $600 $320 Direct labour ($20 per hour) 100 80 Manufacturing overhead ($35 per direct labour hour) 175 140 Total per-unit cost $875 $540 In 2020, Jacobson manufactured 20,000 units of the Royale and 10,000 units of the Majes . overhead rate of $35 per direct labour hour was determined by dividing total estimated manufactus overhead of $4.9 million by the total direct labour hours (140,000) for the two models. Under traditional costing, the gross profit on the models was $525 for the Royale (or $1,700 $875), and $560 for the Majestic (or $1,100 - $540). Because of this difference, management is conside ering phasing out the Royale model and increasing the production of the Majestic model. Before finalizing its decision, management asks Jacobson'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, 2020: Estimated Estimated Use Activity-Based Activity Cost Pools Cost Drivers Overhead of Cost Drivers Overhead Rate Purchasing Number of orders $ 750,000 25,000 $30 per order Machine set-ups Number of set-ups 600,000 20,000 30 per set-up Machining Machine hours 3,100,000 100,000 31 per hour Quality control Number of inspections 450,000 5,000 90 per inspection The cost drivers used for each product were as follows: Cost Drivers Royale Majestic Total Purchase orders 11,250 13,750 25,000 Machine set-ups 10,000 10,000 20,000 Machine hours 40,000 60,000 100,000 Inspections 2,250 2,750 5,000 Instructions cel IUI 41,400, and a new model, the Majestic, which sells for $1,100. The production costs unit under traditional costing for each model in 2020 were as follows: Traditional Costing Royale Majestic Direct materials $600 $320 Direct labour ($20 per hour) 100 80 Manufacturing overhead ($35 per direct labour hour) 175 140 Total per-unit cost $875 $540 In 2020, Jacobson manufactured 20,000 units of the Royale and 10,000 units of the Majes . overhead rate of $35 per direct labour hour was determined by dividing total estimated manufactus overhead of $4.9 million by the total direct labour hours (140,000) for the two models. Under traditional costing, the gross profit on the models was $525 for the Royale (or $1,700 $875), and $560 for the Majestic (or $1,100 - $540). Because of this difference, management is conside ering phasing out the Royale model and increasing the production of the Majestic model. Before finalizing its decision, management asks Jacobson'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, 2020: Estimated Estimated Use Activity-Based Activity Cost Pools Cost Drivers Overhead of Cost Drivers Overhead Rate Purchasing Number of orders $ 750,000 25,000 $30 per order Machine set-ups Number of set-ups 600,000 20,000 30 per set-up Machining Machine hours 3,100,000 100,000 31 per hour Quality control Number of inspections 450,000 5,000 90 per inspection The cost drivers used for each product were as follows: Cost Drivers Royale Majestic Total Purchase orders 11,250 13,750 25,000 Machine set-ups 10,000 10,000 20,000 Machine hours 40,000 60,000 100,000 Inspections 2,250 2,750 5,000 Instructions
