1. Incorporate the image above and Describe TWO differences in profitability resulting from the two costing approaches. 4 marks

2. Incorporate the image above and give a clear explanation why the overhead cost is so different using activity-based costing. 2 marks

Laventura Boating Company (Direct labour hours as allocation base) FISHING BOAT LUXURY BOAT Direct materials Direct labour Overhead Total product cost per unit (a) Sales price (b) Profit= (b)-(a) 32 000 19 200 40 960 92 160 102 400 10 240 41 600 24 000 51 200 116 800 144 000 27 200 Activity-Based Costing (several different allocation bases) FISHING BOAT LUXURY BOAT Direct materials Direct labour Overhead Total product cost per unit (a) Sales price (b) Profit= (b)-(a) 32 000 19 200 32 128 83 328 102 400 19 072 41 600 24 000 95 360 160 960 144 000 (16 960)