Reference no: EM132463283

The results for the trousers line, using the volume-based approach, are as follows:

Number of units produced                10,000

Price (all figures in £)                     20.525

Total revenue                              205,250

Direct materials                             33,750

Direct labor                                 112,500

Overhead (volume-based)                22,500

Total product cost                        168,750

Nonmanufacturing expenses             31,500

Total cost                                         200,250

Profit margin for trousers                 5,000

Recently, it has conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows:

Pattern cutting                £22,000

Grading                           19,000

Lay planning                    18,500

Sewing                            21,000

Finishing                          14,300

Inspection                         6,500

Boxing up                          3,500

Storage                            7,000

Required:

Question 1: Determine the profit margin for trousers using ABC.