Problem 17-2A Schultz Electronics manufactures two large-screen television model
ID: 2352397 • Letter: P
Question
Problem 17-2ASchultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit under traditional costing for each model in 2012 was as follows.
Traditional Costing
Royale
Majestic
Direct materials
$700
$420
Direct labor ($20 per hour)
120
100
Manufacturing overhead ($38 per DLH)
228
190
Total per unit cost
$1,048
$710
In 2012, 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 or ($1,600
Explanation / Answer
Royale
Magestic
total assigned costs
4,035,000
3,565,000
cost per unit
161.40
356.50
calculations:
Royale:
PUrchasing: 17,000*30 = 510,000
machine setups: 5000*50 = 250,000
machining: 75000*40 = 3,000,000
quality control: 11000*25 = 275,000
total: $4,035,000
Per unit: 4,035,000/25,000 = $161.40 per unit
Magestic
PUrchasing: 23000*30 = 690,000
machine setups: 13000*50 = 650,000
machining: 45,000*40 = 1,800,000
quality control: 17000*25 = 425,000
total: $3,565,000
Per unit: 3,565,000/10,000 = $356.50 per unit
Royale
Magestic
total assigned costs
4,035,000
3,565,000
cost per unit
161.40
356.50
calculations: