Problem 17-2A Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,580, and a new model, the Majestic, which sells for $1,320. The production cost computed per unit under traditional costing for each model in 2017 was as follows Traditional Costing Direct materials Direct labor ($20 per hour) Manufacturing overhead ($42 per DLH) Total per unit cost Royale Majestic $400 100 210 $710 $650 120 252 $1,022 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 $8,394,440 by the total direct labor hours (200,000) for the two models Under traditional costing, the gross profit on the models was Royale $558 ($1,580 - $1,022) and Majestic $610 ($1,320 $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 Use 0 Cost Drivers Activity- Based Overhead Rate Activity Cost Pools Estimated Overhead Cost Drivers Purchasing Machine setups Machining $1,315,800 926,440 5,346,000 806,200 $34/order Number of orders Number of setups Machine hours Number of 38,700 17,480 $53/setup 118,800 $45/hour Quality control 27,800 $29/inspection inspections