Syarikat Kraftangan makes and sells a range of ornamental products in Balikland. Syarikat Kraftangan employs experienced sculptors who have an excellent reputation for producing high-quality products. They have two key products i.e. water fountain known as Fountain and a large garden statute known as Goblin. The management accountant of Syarikat Kraftangan has estimated the variable costs per unit of The Fountain and The Goblin as being RM622.50 and RM103.75 respectively. He based his calculations on the following information:

() Product data Fountain 2,000 Goblin 4,000 Other products 16,000 Production/sales (units) Total direct material costs Total direct labour cost RM000 RM000 450 150 300 100 RM000 1,200 1,200 (ii) Total variable overheads for Syarikat Kraftangan will amount to RM2,400,000 of which 30% relates to the procurement, warehousing and use of direct materials. All other variable overheads are direct labour related. (iii) Syarikat Kraftangan currently absorbs variable overheads into product units using company-wide percentages on total direct material cost and total direct labour cost. (iv) The directors of Syarikat Kraftangan are considering switching to an activity-based costing system and recently appointed a firm of management consultants to undertake a detailed review of existing operations. As part of that review, the management consultants concluded that estimated relevant cost drivers for material and labour related overhead costs attributable to The Fountain and The Goblin are as follows: Fountain Goblin Other products Direct material related overheads: The cost driver is the volume of raw materials held to facilitate production of each product. Material proportions per product unit: 4 7 Direct labour related overheads: The cost driver is the number of labour operations performed. Labour operations per product unit: Required: (a) Calculate variable cost per unit of both products using an activity-based costing approach. [20 marks] (b) Critically discuss the adoption of activity-based management (ABM) in companies such as Syarikat Kraftangan. [10 marks]