Brixton Industries PLC makes three products: Widgets, Gadgets and Helios. The following budget information relates to Brixton for next year (Table A1.4).

Overheads allocated and apportioned to production departments (including service cost centres) were to be recovered in product costs as follows:

Machining department at £1.20 per machine hour.

Assembly department at £0.825 per direct labour hour.

However, you have determined that the overheads could be reanalysed into cost pools as in Table Al.5.

You have also been provided with the following estimates for the period (Table Al.6).

• Prepare and present a profit calculation showing the profitability of each product using traditional absorption costing.

• Prepare and present a profit calculation showing the profitability of each product using activity-based costing.

• Explain the differences between the product profitability using absorption and activity-based costing.

Transcribed Image Text:

Table A1.4 Brixton Industries budget information. Sales and production (units) Selling price ( per unit) Direct labour and materials ( per unit) Machine hours per unit in machining dept Direct labour hours per unit in assembly dept Widgets Gadgets Helios 50,000 40,000 30,000 45 95 73 32 84 2 7 53 65 4 2