B & B Electronics Company manufactures two large-screen television models: the Deluxe, which has been produced for many years and sells for $900, and the Flat, a new model, which sells for $1,260.

Based on the following income statement for 2016, the CFO at B & B has decided to concentrate the marketing resources on the Flat model and to begin to phase out the Deluxe model.

The standard unit costs for the Flat and Deluxe models are as follows:

Manufacturing overhead was applied on the basis of machine hours at a predetermined rate of $25 per hour. B & B Electronics Company's CFO is in favour of the use of an activity-based costing system and has gathered the following information about the company's manufacturing overhead costs for 2016:

Instructions
Using activity-based costing, determine whether B & B Electronics should continue to emphasize the Flat model and phase out the Deluxe model.

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B & B ELECTRONICS COMPANY Income Statement Year Ended December 31, 2016 Deluxe Sales Cost of goods sold Gross margin Selling and administrative expenses Net profit Units produced and sold Net profit per unit sold Flat $5,040,000 3,680,000 1,360,000 780,000 $ 580,000 $19,800,000 14,960,000 4,840,000 2,640,000 2,200,000 22,000 $100.00 Total $24,840,000 18,640,000 6,200,000 3,420,000 S2,780,000 4,000 $145.00 Flat $650 Deluxe $250 Direct materials Direct labour: Flat (3.5 hrs. X $20/hr.) Deluxe (1.5 hrs. × $20/hr.) 70 30 Machine usage: 100 Flat (4 hrs. X $25/hr.) Deluxe (8 hrs. X $25/hr.) Manufacturing overhead Standard cost 100 $920 200 200 $680 Units of the Cost Driver Deluxe Activity Centres and Cost Drivers Soldering (number of solder joints) Shipments (number of shipments) Quality control (number of inspections) Purchase orders (number of orders) Machine power (machine hours) Machine set-ups (number of set-ups) Total traceable costs Activity Costs Flat 300,000 4,800 21,000 110,000 16,000 4,000 Total $ 900,000 800,000 1,200,000 800,000 1,200,000 15,200 59,000 50,000 176,000 6,000 1,500,000 20,000 80,000 160,000 192,000 10,000 100,000 1,000,000 $4,800,000