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. Activity Annual estimates Costs Activities Production setup 50,000 100 Order processing Materials handling Recomiended cost driver Number of production runs Number of orders Pounds of materials used Machine hours 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 Number of units shipped 50,000 60,000 300,000 100 10,000 The following activities occurred in 2021. 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 Product A Product B Product C 2,000 1,000 500 3,000 6,000 5,000 500 300 200 35 20 45 55 105 40 8,500 1,500 5,000 5,500 3,000 1,500 35 40 25 2,500 2,000 5,500 (a) Comment on the potential problems of using a labour-based cost driver to allocate overhead to products, and discuss why companies still adopt traditional absorption costing despite the problems. (6 marks; max 210 words) Using an example, explain one of the potential benefits of using ABC to allocate overhead to products. (3 marks; max 105 words)