Lyons Denim Company is noted for its impeccable line of denim products. The company operates a plant in Mishawaka, Indiana. This plant specializes in denim hats and denim jackets. In light of declining sales since a peak in 2001, Zach Schroeder, the company's president, recently decided to change from unit-based, traditional costing system to an activity-based costing system. Before making the change company wide, he wanted to assess the effect on the product costs of the Mishawaka plant. To assess the effect of the change, the following data has been gathered: Denim Ware Quantity Direct Costs Machine Hours Set-ups Material Moves 450,000 150,000 Hats 150 1,200,000 100,000 $1,600,000 $300,000 81,25 43,750 Jeans 100 In addition to the above information, Cost of running the Machines: $1,200,000 Cost of moving materials: $2,160,000 Cost of Set-ups: $1,440,000 Required: 1. Compute the unit cost of each hat and each pair of jeans using traditional unit based costing. 2. Compute the unit cost of each hat and each pair of jeans using activity-based costing. 3. Describe why the differences in per unit costs occurred and recommend to Zach whether he should continue with his plan