Covers Ltd produces two different types of car seat covers: Leather and Fabric. In 2022, Covers Ltd produced 6,000 leather seat covers and 10,000 fabric seat covers. At the moment indirect costs are allocated on the basis of direct labour hours. Covers Ltd recently hired a new management accountant, Mason Wang. Mason thin ks Covers Ltd should consider indirect costs through pooling costs into different activities and then implement activity-based costing. Mason has done the preliminary work, and the details for each of the cost pools for the month with other information is provided below: Estimated numbers of Cost Driver Activity Cost driver Estimated indirect costs Leather Fabric Total Design Number of design changes $250,000 400 100 500 Processing Number of machine hours used $750,000 12,000 10,000 22,000 Quality Control Number of tests $250,000 2000 300 2,300 Total overhead cost $1,250,000 The direct costs are also provided as follows: Leather Fabric Total Direct labour hours 20,000 15,000 35,000 Direct Labour costs $150,000 $70,000 $220,000 Direct Material costs $110,000 $20,000 $130,000 Number of Units 6,000 10,000 16,000 Covers Ltd's owners want to apply a 100% mark-up to their cost price when setting their selling prices to ensure the business can keep up with the globally increasing materials costs. The indirect cost rate using traditional costing method is $35.71 per Direct Labour Hour, calculate total cost per unit for Fabric seat covers only, using the below template (3 Marks) Fabric (workings) Allocated indirect cost Add Direct Costs Total Cost Units produced Total cost per unit --= A BIU x2 ABC G 123 C Use the below template Fabric (show workings) Allocated indirect cost Add Direct Costs Total Cost Units produced Total cost per unitMason recommended Covers Lid to change to Activity Based Costing, using the below template to calculate the activity cost rate for Quality Control only (1 Mark) Amount/ Calculations/ workings Activity cost ($) Cost driver Activity/ indirect cost rate A v B I U x2 E ABC X2 G C 123 Use the below template Amount/ Calculations/ workings Activity cost ($) Cost driver Activity/ indirect cost rateMason has done comparisons between the current (traditional) costing method and activity-based costing method, and his findings are as below: Traditional Costing Activity Based Costing Method Method Leather Fabric Leather Fabric Total cost per unit $162.38 $62.57 $131.06 $51.35 i. Help Mason to explain to the owners of Covers Ltd why the total cost per unit is different between the two methods? (1 mark) ii. Highlight 2 benefits of using Activity Based Costing to the owners of Covers Ltd (2 Marks) iii. The current selling price (using the 100% mark-up policy) are $325 per unit for Leather and $125 per unit for Fabric seat covers. What should be the selling price for Fabric only if Covers Ltd wants to implement Activity Based Costing method (1 Mark). Comment on your ndings for the new selling price of Fabric [1 Mark) and suggest what Covers Ltd should do to deal with any differences. (1 Mark) Fabric (workings) Total cost per unit $51.35 Selling Price