Question 4 (22 marks) AB Company produces product Model A and Model B and has identified the following overhead costs and activity drivers for the current year: Expected Quantity 14,000 setups 23,000 orders Overhead Activity Expected Cost Activity Driver Setup costs $140,000 Number of setups Ordering costs $23,000 Number of orders Maintenance $660,000 Power $40,000 Machine hours Kilowatt hours 330,000 machine hours 200,000 kilowatt hours Model A 375,000 The following information relate to the two product models completed during the year: Units completed Model B 300,000 Direct materials $2,250,000 $2,500,000 Direct labour $3,000,000 $1,875,000 Direct labour hours 90,000 110,000 Number of setups 6,000 8.000 Number of orders 8,000 15,000 Machine hours Kilowatt hours 180,000 150,000 80,000 120,000 Required: 1. 2. 3. Previously, AB Company applied manufacturing overhead to all units at the rate of $20.50 per labour hour. Calculate the per unit product cost of Model A and B under the old system. AB Company has recently adopted Activity-Based Costing (ABC) to allocate its manufacturing overhead costs to products. Calculate the per unit cost of each model under the new system (round your answers to two decimal points). Which costing method (plant-wide rate or ABC) is more appropriate for AB Company to allocate the overhead costs to its product models? Explain why. (10+ 10+2=22 marks)