nting I & II (ACCT 221 &ACCT 222 XLS (LO 2). AP Schultz Electromics manufactures
ID: 2339997 • Letter: N
Question
nting I & II (ACCT 221 &ACCT 222 XLS (LO 2). AP Schultz Electromics manufactures for $1,300. The production two ultra high-definition television models the Royale which sells for $1,600, and a new model,the Majestic,which sells cost computed per unit under traditional costing for each model in 2017 was as follows Traditional Costing $ 700 $420 120 100 Manufacturing overhead ($38 per DLH) 228 190 S1,048 710 Direct labor ($20 per hour) Total per unit cost In 2017, 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 expected 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, 2017 Expected Activity-Based Estimated Activity Overhead Use of Cost Drivers h All Rights Reserved. A Division of 11:59 AMExplanation / Answer
Overheads allocated: Royale Majestic Activity Rate Activity OH Activity OH Purchasing 30 17000 510000 23000 690000 Machine Setup 50 5000 250000 13000 650000 Machining 40 75000 3000000 45000 1800000 Quality Control 25 11000 275000 17000 425000 Total Overheads 4035000 3565000 OH cost per unit: Royale Majestic Total overheads Allocated 4035000 3565000 Divide: Number of units 25000 10000 OH cost per unit 161.4 356.5 Req 2. Unit cost and Gross profit per unit: Royale Majestic Cost: Material 700 420 Labour 120 100 Overheads 161.4 356.5 Unit product cost 981.4 876.5 Selling price 1600 1300 Gross Profit per unit 618.6 423.5 Req 3. The management plans of two products is sound as both the products earns a gross profit.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.