Required:(a) Using the activity-based costing system, calculate the cost driver rates for each activity AND product cost per unit for the three product models.(13 marks)(b) Calculate the gross profit per unit for the three product models and advise which model is most profitable under each of the following costing systems:() traditional costing (ii) activity-based costing

Advanced Toys Lid manufactures and sells three models of digital toy games for children. Details of unit costs, prices and profitability of each product under the current traditional costing system are provided below: Premium Advanced Basic Direct materials $ 22.50 $ 15.00 Direct labourA $ 7.50 15.00 12.00 8.00 Manufacturing overhead 60.00 48.00 32.00 Product cost per unit 97.50 75.00 47.50 Selling price per unit 180.00 150.00 110.00 The direct labour wage rate is $20 per hour. The company uses direct labour hours as a basis for absorption of manufacturing overhead. The newly installed activity-based costing system provides the following data on the overhead costs and the sales units: Premium Advanced Basic Sales units 5,000 20,000 50,000 Activities Total overhead Activity level Engineering (Engineering hours) $ 840,000 900 hrs 375 hrs 225 hrs Quality control (Inspection hours) 951,000 5,000 hrs 10,000 hrs 15,000 hrs Machinery (Machine hours) 544,000 640 hrs 2,100 hrs 2,700 hrs Materials handling (DM costs) 525,000 $112,500 $300,000 $375,000 Total $2.860,000 Note: Material handling overheads vary with the direct materials costs