Brixton Industries makes three products: widgets, gadgets, and helios. The following budget information relates to Brixton for next year.

Overhead is allocated to production departments 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 reanalyzed into cost pools as shown below:

You have also been provided with the following estimates for the current accounting period.

a. Prepare a report showing profitability for each product for the next year using the traditional overhead allocation method.

b. Prepare a report showing profitability for each product using activity-based costing.

c. Explain the differences between the products’ profitability using traditional and activity-based costing.

Transcribed Image Text:

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 $65 2 5 4 7 3 2