Assign the total 2020 manufacturing overhead costs to the two products using activity based costing and determine the overhead cost per unit. (round to 2 decimal places, e.g.12.25) In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $38 per direct laborhour was determined by dividing total estimated manufacturing overhead of $7,600,000 by the total direct labor hours (200,000) forthe two models.Under traditional costing, the gross profit on the models was Royale $552 ($1,600 - $1,048) and Majestic $590 ($1,300 - $710).Because of this difference, management is considering phasing out the Royale model and increasing the production of the Majesticmodel.Before finalizing its decision, management asks Schultz's controller to prepare an analysis using activity-based costing (ABC). Thecontroller accumulates the following information about overhead for the year ended December 31, 2020.ActivityCost PoolsPurchasingMachine setupsMachiningQuality controlCost DriversPurchase ordersCost DriversThe cost drivers used for each product were:Machine setupsMachine hoursInspectionsNumber of ordersNumber of setupsMachine hoursNumber of inspectionsRoyale Majestic17,0005,00075,00011,000EstimatedOverhead$1,200,00017,000900,0004,800,000700,000Total23,000 40,00013,00045,00018,000120,00028,000Estimated Use ofCost Drivers40,000$30/order$50/setup$40/hour28,000 $25/inspection18,000Activity-BasedOverhead Rate120,000 Schultz Electronics manufactures two ultra high-definition television models: the Royale which sellsfor $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed perunit under traditional costing for each model in 2020 was as follows.Traditional CostingDirect materialsDirect labor ($20 per hour)Manufacturing overhead ($38 per DLH)Total per unit costRoyale$700120228$1,048Majestic$420100190$710In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. Theoverhead rate of $38 per direct labor hour was determined by dividing total estimated manufacturingoverhead of $7,600,000 by the total direct labor hours (200,000) for the two models.Under traditional costing, the gross profit on the models was Royale $552 ($1,600 - $1,048) andMajestic $590 ($1,300-10). Because of this difference, management is considering phasing outthe Royale model and increasing the production of the Majestic model.Before finalizing its decision, management asks Schultz's controller to prepare an analysis usingactivity-based costing (ABC). The controller accumulates the following information about overheadfor the year ended December 31, 2020.

Activity rate :— It is the rate used to allocate manufacturing overhead to cost object under…

In 2020, Schultz manufactured 25,000 units of the Royale and 10,000 units of the Majestic. The overhead rate of $38 per direct labor hour was determined by dividing total estimated manufacturing overhead of $7,600,000 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $552 ($1,600 - $1,048) and Majestic $590 ($1,300 - $710). 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, 2020. Activity Cost Pools Purchasing Machine setups Machining Quality control The cost drivers used for each product were: Cost Drivers Purchase orders Machine setups Machine hours Cost Drivers Number of orders Number of setups Machine hours Number of inspections Inspections 5,000 75,000 11,000 Estimated Overhead $1,200,000 Royale Majestic 17,000 23,000 13,000 18,000 45,000 120,000 28,000 17,000 900,000 4,800,000 700,000 Total 40,000 Estimated Use of Cost Drivers Activity-Based Overhead Rate 40,000 $30/order 18,000 $50/setup 120,000 $40/hour 28,000 $25/inspection

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q