Trujillo Stereos manufactures two for $450 per speaker. The production cost computed per unit under traditional high fidelity speaker models: the Sonic which sells for $500 per speaker, and the Boom which sells costing for each model in 20"13 was as follows:

Â	Sonic	Boom
Direct materials	$150	$140
Direct labor ($20 per hour)	80	60
Manufacturing overhead ($30 per DLH)	120	90
Total	$350	$290

In 2013, Trujillo manufactured 80,000 units of the Sonic and 60,000 units of the Boom. The overhead rate of $30 per direct labor hour was determined by dividing total expected manufacturing overhead of $ 15,000,000 by the total direct labor hours (500,000) for the two models.

under traditional costing, the gross profit on the models was: Sonic $150 ($500 - $350i and BOOM $160 ($450 - $290). Because of this difference, management is considering phasing out the Sonic model and increasing the production of the Boom model.

Before finalizing its decision, management asks the controller of Trujillo to prepare an analysis using activity-based costing (ABC). The controller accumulates the following information about overhead for the year ended December 3"1, 2013.

Â	Â	Â	Â	Activity
Â	Â	Â	Expected Use	Based
Â	Â	Estimated	of Cost Drivers	Overhead
Activity	Cost Driver	Overhead	Per Activity	Rate
Purchasing	Number of orders	$3,000,000	120,000	$25
Machine setups	Number of setups	2,000,000	40,000	50
Machining	Machine hours	9,000,000	200,000	45
Quality control	Number of inspections	1,000,000	25,000	40

The cost drivers used for each product were:

Cost Driver	Sonic	Boom	Total
Purchase orders	80,000	40,000	120,000
Machine setups	30,000	10,000	40,000
Machining	90,000	110,000	200,000
Quality control	15,000	10,000	25,000

Instructions

Assign the total 2013 manufacturing overhead costs to the two products using activity-based costing (ABC).

What was the cost per unit and gross profit of each model using ABC costing?

Are management"s future plans for the two models sound?