Question 3 (15 marks) Sporty Ltd. produces scooters and skateboards. At the beginning of the year, the following volume of activities were budgeted for the year: Production volume/units Direct labour hours Number of setups Machine hours Engineering hours Packing orders Scooters Skateboards 100,000 400,000 200,000 300,000 50 50 200,000 300,000 100,000 200,000 100,000 500,000 The following overhead costs were estimated for the year: Activity Expected Cost Setups $400,000 Machining $1,000,000 Engineering $300,000 Packing $900,000 The prime cost for scooters and skateboards is below: Scooters Skateboards Direct materials (per unit) $6 $2.25 Direct labour (per unit) $8 $2.50 Required: 1. Using direct labour hours to apply overhead to production, calculate the per unit product cost of scooters and skateboards. (Assume that the actual volume of direct labour hours is the same as the budgeted amount for the year). 2. Calculate the per unit product cost of scooters and skateboards using the Activity- Based Costing (ABC) method. (Assume that the actual volume of activities is the same as the budgeted amounts for the year). 3. Explain why the unit product cost of scooters and skateboards is different under the ABC method and plantwide method. Based on your understanding of product costing, advise which overhead costing method should be employed by Sporty Ltd. and why. Start your answer here: (5+7+3=15 marks)