Question 1 Klean Services Pte Ltd is a firm that provides cleaning services. It started with serving residential clientsbut recently started to provide contracts for commercial cleaning services. Andrew, the owner believes that commercial cleaning is more profitable. He is considering dropping residential services altogether. Employees worked a total of 20,000 hours last year - 12,000 on residential jobs and 8,000 on commercial jobs. Their wages and benefits amounted to $12 per hour Cleaning supplies are included in overhead. All overhead is allocated on the basis of labour-hours worked, which is also the basis for charging customers. Andrew charges customers $18.50 per hour for residential cleaning and $20.00 per hour for commercial work. Overhead consists of costs of transportation, equipment use and cleaning supplies, which can be traced to the following activities: Activity Level Commercial Residential Activitv Cost-driver base Cost Transportation Number of trips made $28,000 50 Equipment hours $57,000 4,000 2,000 Equipment use Cleaning Supplies Areas serviced (m') $50,000 70,000 130,000 Total overhead $135,000 Required: Calculate the profits of commercial and residential service by applying a traditional overhead cost allocation method. (a) (8 marks) (b)Calculate the profits of commercial and residential service by applving an activity-based costing method (9 marks) Compare your findings and advise Andrew on his proposal to drop the residential services. Explain your recommendation (c) (8 marks)