Racquet Company produced 2 different types of tennis racquets - a beginner model called the Ace and an advanced model called the Sureshot. This month, the company has produced 10,000 units of the Ace and 4,000 of the Sureshot, all of which were sold. The Ace sells for $220 each and the Sureshot for $175 each(unstrung). Both racquets are made of a mixture of titanium and fiberglass at a cost of $20 per unit, so the raw materials used to make a racquet is the same, regardless of which racquet is produced. Each racquet takes 0.5 direct labour-hours to make. The company pays their employees $10 per hour. Traditionally, Racquet has allocated overhead based on the amount of direct labour dollars. The overhead allocation is $10 overhead for each $1 of direct labour. Ms. Azziz, the newly hired accountant, is questioning the traditional method of overhead allocation. She further analyzed the overhead for the month of December 2020 and discovered the following details: MOH Component Activity Generating the MOH Machine amortization Indirect materials Indirect labour Maintenance Cleaning Factory insurance Heat, light, & power Amount 220,000 Machine hours (MH) 50,000 Direct material cost (DM) 80,000 Direct labour hours (DLH) 150,000 Machine hours (MH) 100,000 Square footage occupied (SQF) 25,000 75,000 $700,000 Square footage occupied (SQF) Machine hours (MH) Total monthly MOH Ms. Azziz also obtained the following information regarding the production of the 2 products: Overhead Component Total Amount of Machine amortization Indirect materials Indirect labour Maintenance Cleaning Factory insurance Heat, light, & power Activity 22,000 MH Resources Used by Ace 2 MH/unit $280,000 DM $20 DM/unit 1/2 DLH/unit 7,000 DLH 2 MH/unit 7,500 SQF 22,000 MH 10,000 SQF 10,000 SQF 22,000 MH 2 MH/unit 7,500 SQF Resources Used by Sureshot 12 MH/unit $20 DM/unit 1/2 DLH/unit 12 MH/unit 2,500 SQF 2,500 SQF 12 MH/unit Required (15 marks - 45 minutes) 1. Prepare the income statement under both the traditional and activity-based costing systems for the both models. 2. Identify and briefly explain two advantages and disadvantages of using the ABC method over the traditional costing method. 3. Compare your answers in parts (a) and (b). Is the overhead charged to each product the same under each method? Explain why.