Question 3 (22 marks) Lany Company produces Product D and E and has identified the following overhead costs and activity drivers for the current year: Overhead Activity Expected Cost Activity Driver Setups $50,000 Number of setups Ordering $30,000 Number of orders Maintenance $400,000 Machine hours Power $200,000 Kilowatt hours The following information relate to the two products completed during the year: Product D Product E Units completed 40,000 units 20,000 units Direct materials cost $800,000 $1,000,000 Direct labour cost $1,000,000 $2,000,000 Direct labour hours 50.000 40,000 Number of setups 4,000 6,000 Number of orders 40,000 20,000 Machine hours 10,000 10,000 Kilowatt hours 260,000 140,000 Required: 1. In the past, Lany Company allocated manufacturing overhead costs to its products at the rate of $35 per labour hour. Calculate the per unit product cost of product D and E under the old system. 2. Larry Company adopted the Activity-Based Costing (ABC) method this year to allocate its manufacturing overhead costs to products. Calculate the per unit cost of product D and E using ABC. 3. Which overhead costing method (ABC or plant-wide) is more appropriate for Larry Company to allocate the overhead costs to its products? Why? (10 + 10 + 2 = 22 marks) Start your answer here