Fleet Street Incorporated a manufacturer of high-fashion clothing for women, is located in South London in the UK. Its product line consists of trousers (28%), skirts (34%), dresses (15%), and other (23%). Fleet Street has been using a volume-based rate to assign overhead to each product; the rate it uses is 2.50 per unit produced. The results for the trousers line, using the volume-based approach, are as follows:

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:

Required:

1. Determine the profit margin for trousers using ABC.

\begin{tabular}{|c|c|} \hline Number of units produced & 10,000 \\ \hline Price (all figures in E ) & 29.75 \\ \hline Total revenue & 297,500 \\ \hline Direct materials & 48,900 \\ \hline Direct labor & 163,000 \\ \hline Overhead (volume-based) & 25,000 \\ \hline Total product cost & 236,900 \\ \hline Nonmanufacturing expenses & 44,200 \\ \hline Total cost & 281,100 \\ \hline Profit margin for trousers & 16,400 \\ \hline \end{tabular} \begin{tabular}{lr} Pattern cutting & 32,650 \\ Grading & 28,200 \\ Lay planning & 27,500 \\ Sewing & 31,200 \\ Finishing & 21,200 \\ Inspection & 9,600 \\ Boxing up & 5,200 \\ Storage & 10,400 \end{tabular}