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for $1,580, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) Total per unit cost Royale $660 120 240 $1,020 Majestic $410 100 200 $710

for $1,580, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) Total per unit cost Royale $660 120 240 $1,020 Majestic $410 100 200 $710

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) Total per unit cost Activity Cost Pools Purchasing Machine setups Machining Royale $660 Cost Drivers 120 Number of orders 240 In 2020, 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 estimated manufacturing overhead of $8,052,900 by the total direct labor hours (200,000) For the two models. Number of setups Machine hours $1,020 Under traditional costing the gross profit on the models was Royale $560 ($1.580-$1,020) and Majestic $560 ($1,270-$710). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model: Majestic $410 100 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, 2020. 200 $710 Estimated Overhead $1,248,000 918,000 5,077.800 Estimated Use of Cost Drivers 39,000 18,000 120.900 Activity-Based Overhead Rate $32/order $51/setup $42/hour
Transcribed Image Text: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 $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($40 per DLH) Total per unit cost Activity Cost Pools Purchasing Machine setups Machining Royale $660 Cost Drivers 120 Number of orders 240 In 2020, 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 estimated manufacturing overhead of $8,052,900 by the total direct labor hours (200,000) For the two models. Number of setups Machine hours $1,020 Under traditional costing the gross profit on the models was Royale $560 ($1.580-$1,020) and Majestic $560 ($1,270-$710). Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majestic model: Majestic $410 100 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, 2020. 200 $710 Estimated Overhead $1,248,000 918,000 5,077.800 Estimated Use of Cost Drivers 39,000 18,000 120.900 Activity-Based Overhead Rate $32/order $51/setup $42/hour
Machine setups Machining Quality control The cost drivers used for each product were: Cost Drivers Purchase orders Machine setups Machine hours Inspections (a) Number of setups Machine hours Number of inspections Royale Majestic 16,000 5,000 76,000 11,000 Cost per unit Total assigned costs $ 918,000 5,077,800 809,100 Total 23,000 39,000 13,000 44,900 120,900 16,900 27,900 Assign the total 2020 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 18,000 S 18,000 $51/setup 120,900 $42/hour 27,900 $29/inspection 5 Majestic
Transcribed Image Text:Machine setups Machining Quality control The cost drivers used for each product were: Cost Drivers Purchase orders Machine setups Machine hours Inspections (a) Number of setups Machine hours Number of inspections Royale Majestic 16,000 5,000 76,000 11,000 Cost per unit Total assigned costs $ 918,000 5,077,800 809,100 Total 23,000 39,000 13,000 44,900 120,900 16,900 27,900 Assign the total 2020 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 18,000 S 18,000 $51/setup 120,900 $42/hour 27,900 $29/inspection 5 Majestic
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