Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2017 was as follows. Traditional Costing Royale Majestic Direct materials $640 $430 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,012 $740 In 2017, Schultz 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 expected manufacturing overhead of $8,377,580 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $568 ($1,580 – $1,012) and Majestic $580 ($1,320 – $740). 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 $1,417,500 40,500 $35/order Machine setups Number of setups 1,048,680 19,420 $54/setup Machining Machine hours 5,134,200 119,400 $43/hour Quality control Number of inspections 777,200 26,800 $29/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 17,700 22,800 40,500 Machine setups 5,820 13,600 19,420 Machine hours 74,500 44,900 119,400 Inspections 10,300 16,500 26,800 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.) Royale Majestic Total assigned costs $ $ Cost per unit $ $ eTextbook and Media Calculate cost per unit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.) Royale Majestic Cost per unit $ $ eTextbook and Media Calculate gross profit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.) Royale Majestic Gross profit $ $

Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2017 was as follows. Traditional Costing Royale Majestic Direct materials $640 $430 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,012 $740 In 2017, Schultz 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 expected manufacturing overhead of $8,377,580 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $568 ($1,580 – $1,012) and Majestic $580 ($1,320 – $740). 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 $1,417,500 40,500 $35/order Machine setups Number of setups 1,048,680 19,420 $54/setup Machining Machine hours 5,134,200 119,400 $43/hour Quality control Number of inspections 777,200 26,800 $29/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 17,700 22,800 40,500 Machine setups 5,820 13,600 19,420 Machine hours 74,500 44,900 119,400 Inspections 10,300 16,500 26,800 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.) Royale Majestic Total assigned costs $ $ Cost per unit $ $ eTextbook and Media Calculate cost per unit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.) Royale Majestic Cost per unit $ $ eTextbook and Media Calculate gross profit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.) Royale Majestic Gross profit $ $

Name: Schultz Electronics manufactures two ultra high-definition television
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Description: Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 1PB: Bobcat uses a traditional cost system and estimates next years overhead will be $800.000, as driven...

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Traditional Costing	Royale	Majestic
Direct materials	$640	$430
Direct labor ($20 per hour)	120	100
Manufacturing overhead ($42 per DLH)	252	210
Total per unit cost	$1,012	$740

In 2017, Schultz 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 expected manufacturing overhead of $8,377,580 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $568 ($1,580 – $1,012) and Majestic $580 ($1,320 – $740). 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	$1,417,500	40,500	$35/order
Machine setups	Number of setups	1,048,680	19,420	$54/setup
Machining	Machine hours	5,134,200	119,400	$43/hour
Quality control	Number of inspections	777,200	26,800	$29/inspection

The cost drivers used for each product were:

Cost Drivers	Royale	Majestic	Total
Purchase orders	17,700	22,800	40,500
Machine setups	5,820	13,600	19,420
Machine hours	74,500	44,900	119,400
Inspections	10,300	16,500	26,800

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.)

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

eTextbook and Media

Calculate cost per unit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.)

		Royale		Majestic
Cost per unit		$		$

eTextbook and Media

Calculate gross profit of each model using ABC costing. (Round answers to 2 decimal places, e.g. 12.25.)

		Royale		Majestic
Gross profit		$		$

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