Question

Problem 4-2A (Part Level Submission)

Schultz Electronics manufactures two large-screen televisionmodels: the Royale which sells for $1,546, and a new model, theMajestic, which sells for $1,315. The production cost computed perunit under traditional costing for each model in 2014 was asfollows.

Traditional Costing	Royale	Majestic
Direct Materials	$640	$410
Direct Labor ($20 per hour)	120	100
Manufacturing Overhead ($41 per DLH)	246	205
Total per unit cost	$1006	$715

In 2014, Schultz manufactured 25,000 units of the Royale and10,000 units of the Majestic. The overhead rate of $41 per directlabor hour was determined by dividing total expected manufacturingoverhead of $8,154,010 by the total direct labor hours (200,000)for the two models.

Under traditional costing, the gross profit on the models wasRoyale $540 or ($1,546 – $1,006), and Majestic $600 or ($1,315 –$715). Because of this difference, management is consideringphasing out the Royale model and increasing the production of theMajestic model.

Before finalizing its decision, management asks Schultz’scontroller to prepare an analysis using activity-based costing(ABC). The controller accumulates the following information aboutoverhead for the year ended December 31, 2014.

Activities	Cost Drivers	Estimated Overhead	Expected use of cost Drivers	Activity-Based Overhead Rate
Purchasing	Number of Orders	$1,395,450	39,870	$35/order
Machine setups	Number of Setups	967,250	18,250	53/setup
Machining	Machine hours	4,976,990	121,390	41/hour
Quality control	Number of inspections	814,320	28,080	29/inspection

The cost drivers used for each product were:

Cost Drivers	Royale	Majestic	Total
Purchase orders	16,510	23,360	39,870
Machine setups	5,270	12,980	18,250
Machine hours	75,660	45,730	121,390
Inspections	11,900	16,180	28,080

Assign the total 2014 manufacturing overhead costs to the twoproducts using activity-based costing (ABC) and determine theoverhead cost per unit. (Round cost per unit to 2decimal places, e.g. $12.25.)

	Royale	Majestic
Total assigned costs	$_______________	$_____________
Cost per unit	$_______________	$_____________