Question

P4-2A Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional costing for each model in 2017 as follows Assign overhead to products using ABC and evaluate decision for $1,600 and Traditional Costing Direct materials Direct labor ($20 per hours) Manufacturing overhead ($38 per DLH) Royale $700 120 228 $1,048 Majestic $420 100 190 $710 Total per unit cost In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of 38 per direct labor hour was determined by dividing total expected manufacturing overhead of $7,600,000 by the Under traditional costing, the gross profit on the models was Royale 552 ($1,600- $1,048) and Majestic $590 Before finalizing its decision, management asks Schultz's controller to prepare an analysis using activity-based total direct labor hours (200,000) for the two models. ($1,300 -$710). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model costing (ABC). The controller accumulates the following information about overhead for the year ended December 31, 2017 Activity Cost Pools Estimated Overheacd Estimated Use of Cost Drivers Activity-Based Rates $30/order $50/setup $40/hour Cost Drivers Purchasing Machine setups Machining Number of orders Number of setups Machine hours Number of inspections $1,200,000 900,000 4,800,000 700,000 40,000 18,000 120,000 28,000 $25/inspection Quality control The cost drivers used for each product were: Royale Purchase orders 17,000 5,000 75,000 11,000 Majestic 23,000 13,000 45,000 17,000 Cost Drivers Machine setups Machine hours Inspections Total 40,000 18,000 120,000 28,000

Answer 1

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Part 2