Bottoms Ltd. manufactures women's leggings and pants and had the following budgeted volume of activities for the year:

	Leggings	Pants
Production volume/units	400,000	200,000
Direct labour hours	140,000	160,000
Number of setups	600	400
Number of orders	30,000	20,000
Number of inspections	40,000	20,000
Machine hours	100,000	100,000
Kilowatt hours	600,000	400,000

The following overhead costs were estimated for the year:

Overhead Activity	Expected Cost
Setup costs	$200,000
Inspection costs	$180,000
Ordering costs	$100,000
Maintenance	$700,000
Power	$800,000

The prime cost for leggings and pants is below:

	Leggings	Pants
Direct materials (per unit)	$0.50	$1
Direct labour (per unit)	$0.375	$1.50

Required:

a)Using direct labour hours to apply overhead to production, calculate the per unit product cost of leggings and pants. (Assume that the actual volume of direct labour hours is the same as the budgeted amount for the year).

b)Calculate the per unit product cost of leggings and pants using the Activity-Based Costing (ABC) method. (Assume that the actual volume of activities is the same as the budgeted amounts for the year).

c)Explain why the unit product cost of leggings and pants is different under the ABC method and plantwide method and based on your understanding of product costing, advise which overhead costing method should be employed by Bottoms Ltd. and why.