(Contrasting Traditional and ABC Costing) Brixton Industries makes three products: widgets, gadgets, and helios. The following budget information relates to Brixton for next year.

Â	Widgets	Gadgets	Helios
Sales and production (units)	50,000	40,000	30,000
Selling price (per unit)	$45	$95	S73
Direct labour and materials (per unit)	$32	$84	565
Machine hours per unit in Machining Dept.	2	5	4
Direct labour hours per unit in Assembly Dept.	7	3	2

Overhead is allocated to production departments as follows:

• Machining Department at $1.20 per machine hour
• Assembly Department at $0.825 per direct labour hour

However, you have determined that the overheads could be reanalyzed into cost pools as below:

Cost pool	Cost ($)	Cost Driver	Quantity
Machining services	357,000	Machine hours	420,000
Assembly services	318,000	Direct labour hours	530,000
Set-up	26,000	Set-ups	520
Order processing	156,000	Customer orders	32,000
Purchasing	84,000	Supplier orders	11,200

You have also been provided with the following estimates for the current accounting period.

Â	Widgets	Gadgets	Helios
Number of set-ups	120	200	200
Customer orders	8,000	8,000	16,000
Supplier orders	3,000	4,000	4,200

1. Prepare a report showing profitability for each product for the next year using the traditional overhead allocation method.
2. Prepare a report showing profitability for each product using activity-based costing.
3. Explain the differences between the products' profitability using traditional and activity-based costing.