Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,480, 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 $650 $420 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,022 $730 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 $8,449,220 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $458 ($1,480 – $1,022) and Majestic $540 ($1,270 – $730). 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 $1,261,700 40,700 $31/order Machine setups Number of setups 874,120 16,810 $52/setup Machining Machine hours 5,440,500 120,900 $45/hour Quality control Number of inspections 872,900 30,100 $29/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 17,600 23,100 40,700 Machine setups 4,510 12,300 16,810 Machine hours 75,300 45,600 120,900 Inspections 11,900 18,200 30,100 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 $ $ 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 $ $ 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 $1,480, 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 $650 $420 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,022 $730 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 $8,449,220 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $458 ($1,480 – $1,022) and Majestic $540 ($1,270 – $730). 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 $1,261,700 40,700 $31/order Machine setups Number of setups 874,120 16,810 $52/setup Machining Machine hours 5,440,500 120,900 $45/hour Quality control Number of inspections 872,900 30,100 $29/inspection The cost drivers used for each product were: Cost Drivers Royale Majestic Total Purchase orders 17,600 23,100 40,700 Machine setups 4,510 12,300 16,810 Machine hours 75,300 45,600 120,900 Inspections 11,900 18,200 30,100 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 $ $ 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 $ $ 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
Uploaded: 2024-03-20T06:32:49.000Z
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Description: Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,480, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in

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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Traditional Costing	Royale	Majestic
Direct materials	$650	$420
Direct labor ($20 per hour)	120	100
Manufacturing overhead ($42 per DLH)	252	210
Total per unit cost	$1,022	$730

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 $8,449,220 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $458 ($1,480 – $1,022) and Majestic $540 ($1,270 – $730). 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	$1,261,700	40,700	$31/order
Machine setups	Number of setups	874,120	16,810	$52/setup
Machining	Machine hours	5,440,500	120,900	$45/hour
Quality control	Number of inspections	872,900	30,100	$29/inspection

The cost drivers used for each product were:

Cost Drivers	Royale	Majestic	Total
Purchase orders	17,600	23,100	40,700
Machine setups	4,510	12,300	16,810
Machine hours	75,300	45,600	120,900
Inspections	11,900	18,200	30,100

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	$	$

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		$		$

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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