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Activity based costing vs traditional costing

I hope this is enough information, but I am seeking a professional opinion on which costing system would work best based on the information below. This is a two question request.

Estimated
Activity        Overhead
Cost pool         Costs       Product C Product D Total

Machine set-up $13,630        130    160            290
Purchase orders $85,750        750    1,000          1,750
General factory $67,760      4,000    2,160         6,160
         $167,140

Unit cost $43.43 $29.73

Question 1:
You are a product manager for product D and are evaluated based on product profitability, which method (activity based costing or the traditional system based on direct labor hours) would you prefer?

Question 2: The government wants to buy product C and will pay for the cost of the product plus a fixed fee. Should you adopt the ABC system or keep the old plant wide overhead system and why?

Solution Summary

The solution contains the computation of cost under activity based costing and traditional costing and to arrive at a decision which is preferable.

$2.19