Blessed PLC produces three types of electronic devices at the same factory: the Tangerine, Yogi, Air. It sells electronic devices throughout the world. Blessed PLC has invested in new technology recently and as result has reduced the size of its workforce.

Before the investment, the company allocated all overhead costs unit direct labour hours, but it is now considering introducing Activity-Based Costing (ABC). The company accountant has produced the following analysis

	Annual output units	Annual direct labour hours	Selling price ($ per unit)	Raw material cost ($ per unit)
Tangerine	1,000	10,000	$2,000	80
Yogi	800	11,000	2,500	120
Air	200	4,000	$2,900	225

The three cost drivers that generate overheads are:

Set-ups - the number of times the production line process the re-set to accommodate the production run

Purchase order- the number of purchase orders

Deliveries to retailers - the number of deliveries of devices to retail showrooms

The annual cost driver volumes relating to each activity and for each type of device are as follows:

	Number of set-ups	Number of purchase orders	Number of deliveries to retailers
Tangerine	25	300	80
Yogi	30	200	60
Air	20	100	50

The annual overhead costs relating to these activities are as follows:

Set-up costs $300,000

Purchase orders of $180,000

Deliveries to retailers $120,000

All direct labour is paid at $100 per hour. The company holds no inventories.

Required:

Calculate the total profit on each of Blessed plc's three types of product using each of the following methods to attribute overheads:

(i) the existing method based upon labour hours (8 marks)

(ii) activity-based costing. (12 marks)