FG specializes in the manufacture of tablets, laptops and desktop PCs. FG currently operates a standard absorption costing system. Budgeted information for next year is given below:

Fixed production overheads are currently absorbed based on a percentage of sales revenue.FG is considering changing to an activity-based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows:

Further details have also been ascertained as follows:

Required:(a) Calculate the total gross profit for each product using the proposed activity-based costing system.(b) Discuss the differences between the gross profit figures calculated in part (a) compared with those calculated under the current absorption costing system.(c) Explain how the information obtained from the activity-based costing system could be used for cost management purposes.

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Desktop Tablets Laptops Total PCs Products $000 $00 $000 $000 Sales revenue Direct material 3640 12480 9880 26000 800 2800 2200 5800 Desktop Total Tablets Laptops PCs Products $000 $000 $000 $000 Direct labour 300 Fixed production overheads 1456 1084 1200 4992 800 2300 3952 10400 Gross profit 3488 2928 7500