Lavender Limited produces three distinct products. Its managers are concerned that the company's profit are not as high as its competitors. They believe they fall in profits could be caused due to the company's uncompetitive selling price(s). for one or more product, and losses on other products. Details of the company's costs and selling prices are as follows: Rain coats Watches Hats 60.00 85.00 490.00 10.00 15.00 Selling Price Direct Costs Labour Direct Material - 1 Direct Material - 11 Total Direct Cost 50.00 71.00 40.00 161.00 15.00 25.00 20.00 35.00 1000 2000 Units produced Machine hours per unit 2.0 2000 10 Currently the company uses the traditional method of allocating indirect overheads, but is considering using the ABC method for increasing the accuracy. The company's indirect overheads are as follows: Depreciation Purchasing Expenses Direct Material - I delivery inspection costs Direct Material - Il delivery inspection costs Set-up costs Production inspection costs El 500000 25000 2100 15001 30000 15000 Activities associated with the overheads are: - Number of suppliers Component deliveries per month Production runs per month Hats 10 51 61 Rain coats 15 5 Watches 55 60 30 Required: - a) Calculate the profit per unit for the three products based on the company's current labour hours based overhead method. (10 marks) (TEST CONTINUED ON NEXT PAGE) b) Calculate the profit per unit for the three products using the principles of ABC. Explain your reasons for choosing the bases of overhead allocation. (30 marks)