Question 5 of 5 < > -/5 E Schultz Electronics manufactures two ultra high-definition television models: the Royale which sells for $1,480, and a new model, the Majestic, which sells for $1,270. The production cost computed per unit under traditional costing for each model in 2020 was as follows. Traditional Costing Direct materials Royale Majestic $600 $390 Direct labor ($20 per hour) 120 100 Manufacturing overhead ($38 per DLH) 228 190 Total per unit cost $948 $680 In 2020, 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 estimated manufacturing overhead of $7,508,000 by the total direct labor hours (200,000) for the two models. Under traditional costing, the gross profit on the models was Royale $532 ($1,480 - $948) and Majestic $590 ($1.270 - $680). 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, 2020. Activity Cost Pools Cost Drivers Estimated Overhead Estimated Use of Cost Drivers Activity-Based Overhead Rate Purchasing Number of orders $1,178,000 38,000 $31/order Machine setups Number of setups 816,000 16,000 $51/setup Machining Machine hours 4,838,000 118,000 $41/hour Quality control Number of inspections 676,000 26,000 $26/inspection The cost drivers used for each product were: Cost Drivers Purchase orders Royale 16,000 Majestic 22,000 Total 38,000