Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (45%), skirts (35%), dresses (15%), and other (5%). Fleet Street Inc. has been using a volume- based rate to assign overhead to each product; the rate it uses is £2.25 per unit produced. 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 identifi ed 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

Determine the profit margin for trousers using ABC and comment on the difference in comparison to the volume-based calculations?