Fabien Ltd - continued: The finance office (cost and management accounts) recently performed an 'activity based production systems analysis for the fixed production overheads. The result is the table below: Cost f Cost driver Set up costs Production scheduling Quality control Depreciation Raw materials storage Total: 10,000 Set ups 3,200 Set ups 17,300 Inspections 9,200 Machine hours 1,800 Materials movements 41,500 Total cost driver quantity per period 140 140 2,500 1,000 1,800 Indirect production overhead recovery rate 71.43 22.86 6.92 9.20 1.00 A further analysis has produced the following indirect production overhead resource required for each product: Activity Based Resource (Cost driver quantity) Requirement (by product) Order / product: Order 1101 Order 1102 Order 1103 'Sky' 'Sun' 'Moon' Total 45 45 15 105 Inspections 1,000 800 1,190 2,990 Machine hours 320 420 250 990 Materials movements 900 400 500 1,800 Set ups Task 5: a. Explain 'Activity Based Costing (ABC) as an alternative to full absorption costing and discuss the potential benefits that ABC might bring to production and information systems of Fabien Ltd Note: Your written explanations should be effectively communicated and should include notes on: The reasons for the development of ABC The 'Activity-Based' concept The process of an ABC system development The potential benefits (if any) you feel could be achieved by the introduction of an ABC system for Fabien Ltd 10 Marks b. Recalculate the gross profits (by product an in total) after allocating fixed production overheads to products using an activity based system 10 Marks The task 5 b. mark include marks allocated to short descriptive notes to workings (