Schultz Electronics manufactures two large-screen television models: the Royale

Question

Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,582, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2014 was as follows.

Traditional Costing Royale Majestic Direct materials $670 $410 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,042 $720
In 2014, 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 $8,357,440 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $540 or ($1,582 Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,582, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2014 was as follows.

Traditional Costing Royale Majestic Direct materials $670 $410 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,042 $720
In 2014, 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 $8,357,440 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $540 or ($1,582 Traditional Costing Royale Majestic $670 $410 120 100 252 210 $1,042 $720 Question 8 Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,582, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2014 was as follows.

Traditional Costing Royale Majestic Direct materials $670 $410 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($42 per DLH) 252 210 Total per unit cost $1,042 $720
In 2014, 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 $8,357,440 by the total direct labor hours (200,000) for the two models.

Under traditional costing, the gross profit on the models was Royale $540 or ($1,582 Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,582, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2014 was as follows. In 2014, 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 $8,357,440 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $540 or ($1,582 - $1,042), and Majestic $600 or ($1,320 - $720). 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, 2014.

Explanation / Answer

driver cost allocation driver cost allocation total
po @ $30 34 17790 604860 22550 766700 13...
Msetup 52 4680 243360 12850 668200...
Mhours 43 75220 3234460 44200 1900...
Inspection 30 10900 327000 17820 5...
total 4409680 total 8279780
produced 25000 10000
cost/unit 176.3872 827.978

cost/unit calculation
total cost/unit calculation
DM 660 390
DL 120 100
mfg overhead 176.3872 827.978
total cost/unit 956.3872 1317.978

selling price 1566 1295
profit 609.6128 -22.978

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