Safety First Ltd is an insurance company that provides three main services: home insurance, car insurance and travel insurance. The retail values charged for providing the three services along with the number of hours taken to provide per service and the number of services provided have been identified as below: Home Insurance Car Insurance Travel Insurance 950 600 350 Retail value (sales price) per service Client advice hours per service Number of insurance services completed 1.2 0.6 0.4 485 440 465 Safety First Ltd expects its total overheads for the year 2018 to be 678,000, and currently allocates overheads to its services on the basis of number of client advice hours. However, the company has recently been advised to consider adopting an activity-based costing approach for allocating overheads to its services. The management accountant has prepared the following analysis of the overhead costs associated with the company's services: Cost Pools Client Advice and Dealing with Accounts Issuing Quotes and Invoices Holding Meetings Assessing Damages and Claims Travelling to Clients Total Overheads: Costs 375,750 18,240 74,980 156,430 52.600 678,000 Safety First Ltd has also gathered the following activity information: Number of quotes issued Number of meetings held Hours spent assessing damages Miles travelled to clients Home Insurance 675 112 Car Insurance 1043 46 489 615 Travel Insurance 248 72 130 336 246 847 REQUIRED: a. Calculate the overheads that should be allocated to the three insurance services using (a) client advice hours, and (b) using the principles of activity-based costing. b Prepare a schedule comparing the gross profit per service under both costing systems and advise the company as to the profit margins achieved under both systems given that the company wishes to make a profit of 20% C. Identify why the ABC basis produces different results from the advice hours basis