ABC Ltd makes three products and applies overhead using a predetermined rate based on direct labour hours. The management accountant of this company recommended switching to activity-based costing (ABC). The following activities, cost drivers, and costs are identified and estimated for 2021. The company also estimated 1,000 labour hours (wage rate = 10/hour) would be worked. Annual estimates Costs Activities Activity 100 Production setup 50,000 Recommended cost driver Number of production runs Number of orders Pounds of materials used Machine hours Order processing Materials handling 10,000 30,000 200 15,000 100,000 10,000 Equipment depreciation and maintenance Quality management Packing and shipping Total estimated overhead Number of inspections 50,000 Number of units shipped 60,000 300,000 100 10,000 The following activities occurred in 2021. Product Product B Product C 2,000 1,000 500 3,000 6,000 5,000 500 300 200 35 20 45 55 105 8,500 1,500 5,000 5,500 3,000 1,500 35 40 25 2,500 2,000 5,500 Number of units produced Direct materials costs Direct labour hours Number of production runs Number of orders Pounds of materials used Machine hours Number of inspections Number of units shipped 40 b) Using the information provided above: (1) Calculate overhead allocation rates for each of the cost drivers recommended by the management accountant, as well as the absorption allocation rate for direct labour hours. (10 marks) (ii) Using the activity allocation rates calculated in (b) (i), estimate the production costs for each product for 2021. (21 marks) (iii) Using the absorption allocation rate calculated in (b) (i), estimate the production costs for each product for 2021. (3 marks) Discuss which product(s) is likely to be over-costed. (1 mark; max 35 words) (c) Discuss whether and why you agree (or disagree) with the management accountant's suggestion to switch to ABC. (6 marks; max 210 words)