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Question 3 Run Faster Lid manufactures running watches available in three models Jogger. Sprinter and Elite. The budgeted costs and production for the year ending 314 March. 2021 are as follows Jogger Sprinter Elite Production quantity (units) 2,900 3,500 2,600 Total direct labour cost (5) 199,500 215,000 209.000 Total direct materials cost () 112,500 275,000 233,000 Total labour hours (Hrs) 4.750 11,200 9,900 Although Run Faster's products are very popular in the market, its profits have been declining steadily, and management is thinking there might be a problem with their costing system in production. The company currently applies factory-wide production overhead on the basis of direct labour hours. Managers are considering a shift to activity-based costing, and the following production activities are identified: Activities Cost Driver Overhead Costs Parts handling cost Number of parts 85,000 Machine cost Machine hours 47,500 Product testing cost Number of test runs 42,000 Dispatching cast Number of customer orders 41,500 The following data have also been collected for the production of each model Jogger Sprinter Elite 875 415 780 Machine hours (bis) No. of test runs 415 350 260 Total parts handled 11,000 12,500 14,000 Orders sent out 12 19 13 Required: a) Calculate for each model the full unit product cost determined by using the traditional method (factory-wide overhead absorption rate). (Round to 2 decimal places.) [5 marks] b) Calculate for each model the full unit product cost determined by using the activity- based costing system (Round to 2 decimal places.) [11 marks] c) Discuss two advantages and disadvantages of activity-based costing, respectively [4 marks) [Total 20 marks]