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Fleet Street Incorporated a manufacturer of highfashion clothing for women, is located in South London in the UK. Its product line consists of trousers (28%),

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Fleet Street Incorporated a manufacturer of highfashion 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 volumebased 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 volumebased approach, are as follows: Number of units produced 10,000 Price (all figures in E) 29.75 Total revenue 297,500 Direct materials 48,900 Direct labor 163,000 Overhead (volumebased) 25,000 Total product cost 236,900 Nonmanufacturing expenses 44,200 Total cost 281,100 Profit margin for trousers 16,400 Recently, Fleet Street conducted a further analysis ofthe 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 E 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

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