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: Sales revenue Direct labor Overhead costs Operating income $000 1,600 800 $000 3,120 2,400 720 The architects absorb overhead as a percentage of the total cost of direct labor and their standard profit 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 Clerical support Information systems General management Printing and photocopying Telephone Total Cost driver Clerical hours Computer hours Management hours Number of drawings Telephone calls Annual cost pool (S) Annual used of cost drivers 130,000 The leisure centre contract caused the following activities to happen: Activity Clerical support Information systems General management Printing and photocopying Telephone You are required to: a. Calculate the absorption cost b. Calculate the activity-based cost Cost driver Clerical hours Computer hours Management hours Number of drawings Telephone calls c. Compare your findings and comment on them. 26,000 hours 300,000 2,000 hours 50,000 5,000 hours 250,000 500,000 pages 70,000 35,000 calls 800,000 Use of cost driver 400 hours 30 hours 40 hours 3,500 pages 300 calls