Question

Crane Electronics manufactures two ultra high-definition television models the Royale which sells for $1.54 Majestic, which sells for $1.270. The production cost computad par unit under traditional costing for each model in 2020 wasas follows. Traditional Costing Direct materials Direct labor($20 per hour) Manufacturing overhead ($42 per DLH) Tatal per unit cost Royale $600 120 252 $1,012 Majestic $410 100 210 $720 In 2020, Crane manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $42 per direct labor hour was determined by dividing total estimated manufacturing overhead of $8,421.200 by the total direct labor hours (200,000) for the two models Under traditional costing the gross profit on the models was Royale $568 ($1.500 - $1.012) and Majestic $550 ($1.270 - $720). 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 Crane's controller to prepare an analysis using activity based costing (ABC). The controller accumulates the following information about overhead for the year anded December 31, 2020, Activity Cost Pools Purchasing Machine setups Machining Quality contro Cost Drivers Number of orders Number of setups Machine hours Number of inspections Estimated Overhead $1.215.200 1.006.500 5.368.5 831000 Estimated Use of Cost Drivers 39.200 18. 200 119.300 27.700 Activity-Based Overhead Rate S31 order $55.setup $45 hour $30 inspection The cost drives used for each product were: Cast Drivers Total Purchase orders Machinesatus Naching hours 29.200 Royale 17.000 5.000 75.000 11000 Majestic 22 200 13:00 119 300 16.700

Answer 1

Ans.

	Royale		Majestic
	Driver Used	Cost Assigned	Driver Used	Cost Assigned
Overhead Rate
Purchase order@$31	17,000	$       527,000.00	22,200	$      688,200.00
Machine setups @$55	5,000	$       275,000.00	13,300	$      731,500.00
Machine hours @$45	75,000	$    3,375,000.00	44,300	$ 1,993,500.00
Inspections @$30	11,000	$       330,000.00	16,700	$      501,000.00
Total assigned costs (a)		$    4,507,000.00		$ 3,914,200.00
Units produced (b)		25,000		10,000
Cost per unit (a) ÷ (b)		$                180.28		$              391.42

	Royale	Majestic
Total assigned costs	$           4,507,000.00	$    3,914,200.00
Cost per unit	$                       180.28	$                391.42

	Royale	Majestic
Direct materials	$                       640.00	$                410.00
Direct labor	$                       120.00	$                100.00
Manufacturing overhead	$                       180.28	$                391.42
Total cost per unit	$                       940.28	$                901.42
Sales price per unit	$                    1,580.00	$            1,270.00
Cost per unit	$                       940.28	$                901.42
Gross profit per unit	$                       639.72	$                368.58

	Royale	Majestic
Cost per unit	$                       940.28	$                901.42
	Royale	Majestic
Gross profit per unit	$                       639.72	$                368.58