Hi there! Please answer the following question and explain the step by step and labelling each part of the question as it should be. Thank you! Fist part of the question is the statement of comprehensive income, second part is the cost pools and activities for ABC costing and the last part is the cost reduction options and the questions.

Carbonite has prepared the following statement of comprehensive income for the year ended December 31, 20X6. Sales are based on 21,335 direct labour hours and 1,066,757 square metres cleaned or an average of 50 square metres per hour. Sales, wage and benefit costs are affected by the total square meters cleaned. Carbonite Statement of comprehensive income For the year ended December 31, 20X6 Revenue $821,651 Cost of sales: Wages and benefits 281,624 Cleaning supplies 88,541 Transportation costs (including fuel, insurance, depreciation, and 30,281 maintenance) Salaries of operations managers 120,000 Total cost of sales $520,446 Gross margin $301,205 Operating expenses: Training $55,500 Billing 129,500 Depreciation (excluding transportation vehicles) 2,350 Repairs and maintenance (excluding transportation) 890 Utilities and telephone 4,620 Rent 10,320 Interest and bank charges 1,050 Business fees 4,200 Advertising and promotion 2,520 Insurance (excluding transportation) 2,730 Total operating expenses $213,680 Net income (Loss) $87,525 Cost pools and activities for activity-based costing analysis used for December 31, 20X6, statement of comprehensive income Activity Cost driver Cost Total Commercial pool activity Cleaning supplies Square metres $70,833 640,054 640,054 commercial Cleaning supplies Square metres 17,708 426,703 residential Billing Number of 129,500 3,054 1,062 invoices Transportation Number of 30,281 53,124 15,937 kilometres Training Number of 55,500 554 416 hours Operations Number of 120,000 3 1 management managers Total expenses $423,822 The industry benchmark for profit is 25% of revenue. In preparation for the budget for 20X7, Carbonite has gathered the following information: 20x7 expected growth data Change in rates: Residential 426,703 1,992 37,187 138 2 Increase in charge-out rate to both commercial and residential clients to $39 per hour Labour wage and benefit rate per hour $13.46 Expected price increase in commercial cleaning supplies costs per square metre (no change in the residential cleaning supplies cost per square metre) 9% Expected increase in transportation costs per kilometre 9% Expected increase in advertising of the commercial service $1,000 Change in activity for ABC analysis: Increase in square metres 7% Increase in number of invoices (commercial only, see option 2 below for residential) 5% Increase total kilometres driven (30% of total kilometres relate to commercial clients) 8% All other expenses will be unchanged except as noted in cost reduction options. costs except operations management are variable costs. All Cost reduction options: 1. Reduce operations management staff costs by putting one residential operations manager on half-time. This would reduce the total cost from $120,000 to $100,000. Change all residential billing to monthly. This would reduce the number of residential invoices sent out by 10% from 20X6 activity. The ABC rate per invoice would remain the same as 20X6. Required: 61) b) Prepare a complete 20X? operating budget segmented for commercial and residential operations, based on the details provided above, using activity-based costing where appropriate. Revenue and all costs except those that can be calculated using activity-based costing or have other budgeted changes should be allocated 60% to commercial and 40% to residential. Make sure to comment on the assumptions that were made in developing the budget. Note: When calculating the budget underthe activity-based costing, determine the 20X6 current rate per unit of activity first. Then apply the changes in both the rate and level of activity where applicable to determine the new costs. Provide a discussion of the results in your report. Focus on the current and predicted profitability of the company. Also consider the profitability of the commercial and residential departments. (2 marks) Your discussion should also include a paragraph on the quality of the budget data, including a review of any external factors that may affect revenues and costs