Mugs 400,000 Question 5 (15 marks) Tea Ltd. manufactures mugs and teapots and had the following information for the year: Units produced Teapots 200,000 Direct materials $200,000 $200,000 Direct labour $150,000 $300,000 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 company's accountant identified the following overhead costs for the current year: Overhead Activity Setup costs Inspection costs Ordering costs Maintenance Power Expected Cost $200,000 $180,000 $100,000 $700,000 $800,000 Required: 1. Calculate the per unit product cost of mugs and teapots using a plantwide overhead rate based on direct labour hours. 2. Calculate the per unit product cost of mugs and teapots using the Activity-Based Costing (ABC) method (show detailed calculations). 3. Explain why the unit product cost of mugs and teapots 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 Tea Ltd. and why. Start your answer here: (5+8+2= 15 marks) I