Andy Company adopts the absorption costing system and costs other than the cost of goods sold are apportioned on the basis of sales floor area. Alice Store is one of the popular store of Andy Company. The operating results of Alice Store for the last three months are as follows: Department menswear $ womenswear $ childrenswear $ Total $ Sales 200,251 106,536 425,089 731,876 Cost of goods sold 63,000 37,500 176,000 276,500 Other costs 118,000 73,750 103,250 295,000 Profit 19,251 (4,714) 145,839 160,376 Mr. David Wong, management accountant of Alice Store, is concerned that the womenswear department has been operating at a loss for some time. David put forward a proposal to close the womenswear department in order to concentrate on the more profitable menswear and childrensbxear departments. David has provided other costs for the Alice Store for the last three months and are as follows: $ Cost driver to be adopted Sales staff wages 64,800 Purchase orders Consultation staff wages 24,960 Number of consultations Warehouse staff wages 30,240 Number of items sold General overheads (light, heat, rates, etc.) 175,000 Floor area (square metres) 295.000 David has also collected the following information for the last three months: Department menswear womenswear childrenswear Number of items sold 1,000 1,500 4,000 Purchase orders 1,000 900 2,500 Floor area (square metres) 16,000 10,000 14,000 Number of consultations 798 200 250 David believes that he can use this information to review the store's performance in the last three months by applying the activity-based costing (ABC). Required 1. 2. Discuss David's belief that the information provided can be used in an activity-based costing analysis. Explain and illustrate, using supporting calculations, how an ABC profit statement might be produced from the information provided. Evaluate and discuss the proposal to close the womenswear department. Discuss the advantages and disadvantages that may arise for Alice Store by adopting activity-based costing in its stores. 3. 4