Reference no: EM131754802
Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,530, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2017 was as follows.
Traditional Costing Royale Majestic
Direct materials $640 $400
Direct labor ($20 per hour) 120 100
Manufacturing overhead ($40 per DLH) 240 200
Total per unit cost $1,000 $700
In 2017, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $40 per direct labor hour was determined by dividing total expected manufacturing overhead of $8,063,250 by the total direct labor hours (200,000) for the two models.
Under traditional costing, the gross profit on the models was Royale $530 ($1,530 - $1,000) and Majestic $570 ($1,270 - $700). 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 Schultz'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, 2017.
Activity
Cost Pools
Cost Drivers Estimated
Overhead
Expected Use of
Cost Drivers
Activity-Based
Overhead Rate
Purchasing Number of orders $1,283,200 40,100 $32/order
Machine setups Number of setups 1,055,450 19,190 $55/setup
Machining Machine hours 5,014,800 119,400 $42/hour
Quality control Number of inspections 709,800 27,300 $26/inspection
The cost drivers used for each product were:
Cost Drivers Royale Majestic
Total
Purchase orders 16,500 23,600 40,100
Machine setups 5,790 13,400 19,190
Machine hours 74,500 44,900 119,400
Inspections 10,900 16,400 27,300
Assign the total 2017 manufacturing overhead costs to the two products using activity-based costing (ABC) and determine the overhead cost per unit. (Round cost per unit to 2 decimal places, e.g. 12.25.)
How do I calcite the total assigned costs and cost per unit here