Gilmarsh is a large partnership of architects which currently operates an absorption costing but is experimenting with an ABC system. The current annual budget shows the following: M M Sales revenue 3,120 Direct labor 1,600 Overhead costs 800 2,400 Operating income 720 The architects absorb overhead as a percentage of the total cost of direct labor and their standard prot margin is 30% of total cost. As part of their investigation into ABC, they wish to compare the two systems on a recently completed set of plans for a leisure centre. The cost of direct labor used on this job is $10,000. Their experimental ABC system is based on the following annual analysis: Activity Cost driver Annual cost pool Annual used of ($1) cost drivers Clerical support Clerical hours 130,000 26,000 hours Information systems Computer hours 300,000 2,000 hours General management Management hours 50,000 5,000 hours Printing and photocopying Number of drawings 250,000 500,000 pages Telephone Telephone calls 70,000 35,000 calls Total 800,000 The leisure centre contract caused the following activities to happen: Activity Cost driver Use of cost driver Clerical support Clerical hours 400 hours Information systems Computer hours 30 hours General management Management hours 40 hours Printing and photocopying Number of drawings 3,500 pages Telephone Telephone calls 300 calls You are required to: a. Calculate the absorption cost b. Calculate the activity-based cost c. Compare your findings and comment on them