QUESTION 3 - Activity- Based Costing Total mark ffor this question: 30 marks [Suggested time: 36 minutes] ABC Company uses the traditional costing system to allocate the manufacturing overhead to its two products X and Y. The total budgeted overhead cost for October is $220,000 with the budgeted direct labor hours of 40,000 hours. The company is considering adopting an activity-based costing system, and collects the following information for the month of October. Product X Product Y Production units 20,000 2,000 Direct materials cost per unit $50.00 $40.00 Direct labor cost per hour $10.00 $10.00 Direct labor hours (in total) 34,000 6,000 Overhead cost pool Overhead Total Activity cost activity Consumption Product Product X Y Machine setup $ 60,000 1,000 setups 300 700 Engineering change | $ 80,000 100 orders 20 80 order Facility rent $ 80,000 1,000 sq. 300 700 feet REQUIRED Show ALL relevant workings and where necessary label all the overhead rates correctly. (1) Compute the unit manufacturing costs for each product under the traditional costing system. (10 marks) (2) Compute the unit manufacturing costs of each product under the activity-based costing system. (15 marks) (3) Prepare a memorandum to the plant manager recommending a costing system which best reflects the cost of the product. Support your recommendation with relevant data.