Mama Cakes and Bakery Shop produce three types of cakes which are vanilla cake, chocolate cake and brownies cake. Each of the cake uses the same production methods and equipment.A traditional costing method is used at present, although an activity-based costing (ABC) method is being considered.Details of the three detergents for a typical period are given below:

Vanilla Cake

Chocolate Cake

Brownies Cake

Labour hour/Unit

0.5 hour

1.5 hours

1.0 hour

Machine hour/Unit

1.5 hours

1.0 hour

3.0hours

Materials/Unit

RM20

RM12

RM25

Volume (Units)

750

1,250

7,000

Direct labour costs RM6 per hour and production overheads are absorbed on a machine hour basis.The rate for the period is RM28 per machine hour.Further analysis shows that the total of production overheads can be divided as follows:

Costs relating to set-ups

35%

Costs relating to machinery

20%

Costs relating to materials handling

15%

Costs relating to inspection

30%

Total production overhead

100%

The following activity volumes are associated with the product line for the period as a whole. Total activities for the period:

Vanilla Cake

Chocolate Cake

Brownies Cake

Total

No. of set-up

75

115

480

670

No. of materials handlings

12

21

87

120

No. of inspections

150

180

670

1,000

Required:

A.Calculate the cost per unit for each product using traditional costing method.

B.Calculate the cost per unit for each product using activity-based costing method. (round off the figures)

C.State any TWO (2) criticism of Activity-Based Costing?