Question B3 Coolmaster Ltd is a manufacturer of refrigeration appliances and has been trading for many years. The company has a large factory in the Midlands where it manufactures larder fridges, built-in fridges and chest freezers. It has always used absorption costing on the basis of labour hours to absorb its fixed production overheads and current management are happy with this approach. The sales manager now wants to start to produce American style fridge freezers. Due to capacity constraints, the company cannot produce these in addition to its existing three product lines and so it has been decided that they will cease the production of chest freezers in order to produce the American style fridge freezers instead. The company has produced the following budgeted information for August 2022: Built-in fridge American style fridge freezer 250 Total Sales and production (units) Unit Selling Price () Unit Material Cost (E) Unit Labour cost (E) Total number of purchase orders Production set-ups per unit Total number of deliveries Larder fridge 400 350 50 80 4 10 300 Labour rate is 20 per hour. 450 65 100 6 3 50 Production overheads Purchasing costs Production run set-up costs Delivery costs 1,500 885 230 5 2 5 85,000 80,000 34.000 199,000 A001 Management Accounting The sales manager is shocked when it is reported that the American style fridge freezer is not a viable product due to low profitability per unit. You are the management accountant and the sales manager asks you to investigate the profitability of the American style fridge freezer. (a) Calculate the profit per unit of each of the three products using the current [8] absorption costing system (showing calculations and your answer to two decimal places). (b) Your calculation should include how the total cost is made up for each of the three products. Calculate a revised profit per unit for each of the three products using an activity-based costing (ABC) approach (showing calculations and your answer to two decimal places). Your answer should show clearly how the total cost is made up for each of the three products. [12]