Question 7 Robust Laptops Co. make laptop computers for use in dangerous environments, Standard and Super Laptops. The company's main customers are organizations like oil companies and the military that require a laptop that can survive rough handling in transport to a site and can be made to their unique requirements. The company started as a basic laptop manufacturer, but its competitors grew much larger and the company had to find a niche market where its small size would not hinder its ability to compete. It is now considered one of the best quality producers in this sector. Robust Laptops Co.'s results for the last fiscal year are shown in the following statement. Sales revenue Income statement Standard Super 2,925,000 2,760,000 5,685,000 550,000 500,000 1,050,000 Total 400,000 200,000 600,000 Direct materials Direct labour Manufacturing overhead costs: Parts handling Production setup Quality control Packaging Operating profit 468,000 1,080,000 720,000 1,440.000 327,000 In response to market pressures, Robust Laptops Co. has invested heavily in new manufacturing technology in recent years and, as a result, has significantly reduced the size of its workforce. Historically, the company has allocated all overhead costs using direct labour costs but is now considering introducing activity-based costing (ABC), Robust Laptops Co.'s accountant has produced the following analysis. Activity cost pool Cost driver Activity level Standard Super Parts handling Number of parts 4,000 2,000 Production setup Number of production runs 50 100 Quality control Number of inspections 200 200 Packaging Number of units ships 1,500 6,000