Q2. Bolts and Brackets Limited manufactures and sells two products: arms and brackets. This year for the first time it is operating an activity-based costing system before it followed absorption costing method. The planned production activity cost pools and cost driver activity levels for all the output for the year are as follows: Activity Cost Pool ($) Activity Level Purchasing materials $41,500 1,000 purchase orders Storing materials $41,600 650 issue notes Setting up machinery $26,400 200 set ups Running machinery cost 7,300 machine hours $73,000 An analysis of actual annual production usage based on activity cost pool for two products types are as follows: Arms Brackets Units produced 1,000 units 500 units Purchase orders 190 325 Stores issue notes 105 200 Set ups 35 60 Machine hours 2600 1275 Direct materials $8250 $3750 Direct labor $46000 $7600 a) Compute the activity rates. b) Calculate the total production cost and cost per unit for arms and brackets using the activity-based costing system. c) Explain why the company decided to adopt activity-based costing system instead of absorption costing system