ABC exam-style question: Kendall Ltd Kendall Ltd produces two models of fridge (Standard and Premier) for domestic use, which it sells to retailers (most of whom are online-only). Budgeted information for the company for the year ahead is presented as follows: Model of fridge Sales Direct material Direct labour Production overheads Gross profit Standard '000 1,980 (550) (220) Premier '000 730 (160) (60) Total '000 2,710 (710) (280) (986) 734 Production/sales (number of fridges) Machine hours per fridge Standard 11,000 8 Premier 2,000 14 The company currently uses a conventional absorption costing system, assigning overheads using a machine hour rate. However, Kendall Ltd is considering switching to an activity-based costing system. The company has looked at its main activities and established the following five 'cost pools' and associated cost drivers: Activity Stores receiving Stores issue Machining Production set-up Quality control Cost driver Number of component deliveries Number of issues from stores Machine hours Number of set-ups Number of quality inspections Production overhead cost pool 122,000 93,600 162,400 394,800 213,200 986,000 The following information has also been established in respect of the year ahead: Standard Premier Number of component deliveries 350 450 Number of issues from stores 3,400 5,600 Number of fridges per production run 500 100 Quality inspections per production run 10 30 For each production run of each model of fridge, the machines must be set up onge Required: a) For each model, calculate the gross profit per fridge using the current absorption costing system b) For each model, calculate the gross profit per fridge using the proposed activity- based costing (ABC) system