Determine the profit margin for trousers using ABC.

Fleet Street Inc., a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (22%), skirts (26%), dresses (14%), and other (38%). Fleet Street has been using a volume-based rate to assign overhead to each product; the rate it uses is 2.28 per unit produced. The results for the trousers line, using the volume-based approach, are as follows: Number of units produced Price (all figures in ) Total revenue Direct materials Direct labor Overhead (volume-based) Total product cost Nonmanufacturing expenses Total cost Profit margin for trousers 13,000 27.36 355,680 58,400 195,000 29,640 283,040 53,000 336,040 19,640 Recently, Fleet Street conducted a further analysis of the trousers line of product, using ABC. In the study, eight activities were identified, and direct labor was assigned to the activities. The total conversion cost (labor and overhead) for the eight activities, after allocation to the trousers line, is as follows: Pattern cutting Grading Lay planning Sewing Finishing Inspection Boxing up Storage 38,540 32,900 32,000 36,800 24,300 10,800 5,900 11,800