Calculation of gross profit using ABC MS manufactures three types of skincare product for sale to retailers. MS currently operates a standard absorption costing system. Budgeted information for next year is given below:

The management accountant of MS is proposing changing to an activitybased costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows:

Further details have been ascertained as follows:

Required:
Calculate for each product:
(i) the total fixed production overhead costs using the current absorption costing system;
(2 marks)
(ii) the total gross profit using the proposed activity-based costing system.
(13 marks)
CIMA P1 Performance Operations

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Products Sales cream ($000) ($000) Anti-ageing Facial masks Collagen fillers Total ($000) ($000) 60000 38000 22000 120000 Direct material 11800 6200 4000 22 000 Direct labour 3700 2400 1900 8000 Fixed production 15 400 overheads Gross profit 74 600 Anti-ageing cream Facial masks Collagen fillers Production and sales (units) 1 000 000 1 200 000 Fixed production overheads are absorbed using a direct material cost 600 000 percentage rate.