GH produces three models of speedboat for sale to the retail market. GH currently operates a standard absorption costing system. Budgeting information for next year is given below: Model of speedboat Superior R'000 Deluxe Ultra Total R'000 R'000 R'000 Sales 54 000 86 400 102 000 242 400 Direct material 17 600 27 400 40 200 85 200 Direct labour 10 700 13 400 16 600 40 700 Production overhead 69 600 Gross profit 46 900 Production/Sales (number of boats) Machine hours per boat Superior Deluxe Ultra 1 000 1 200 800 100 200 300 The production overhead cost is absorbed using a machine hour rate. GH is considering changing to an activity based costing system. The main activities and their associated cost drivers and overhead cost have been identified as follows: Activity Machining Set up Quality inspection Stores receiving Stores issue Cost Driver Production overhead cost R'000 Machine hours 13 920 Number of set ups 23 920 Number of quality inspections 14 140 Number of component deliveries 6 840 Number of issues from stores 10 780 69 600