The company directors of Neo Ltd$,$ have decided to pilot an activity$-$based costing $($ABC$)$ system at one of its sites. The finance controller at the factory produces the following list of activities and estimates of the relevant quantities involved for the $2024$ financial year.

Activity Expected Qty$.$ Total cost of activity $()$

Machining Finishing $($labour$)$ Materials ordering

Materials issues Machine set$-$up $4,000$

$5,000$

$125$

$60$

$3570,200$

$62,100$

$5,900$

$4,400$

$10,000$

The following information for two products, X and Y was also produced

Product X Product Y

Prime cost $($per unit$)14\mathrm{.}8012\mathrm{.}75$

Machine hours $1,5002,500$

Labour hours$*2,0003,000$

Number of orders $8045$

Number of issues $3525$

Number of hours used in set$-$up $1322$

$*$One unit of X uses $1$ labour hour, whereas one unit of Y uses $1\mathrm{.}5$ labour hours. Based on $1$ labour hour per unit, completed production for product X is $2000$ units. Completed production for product Y$,$ based on $1\mathrm{.}5$ labour hours per unit, is also $2000$ units.

Required

a$)$ Calculate the unit cost for product X and Y using labour hours as a basis for allocating the overhead.

b$)$ In light of your answer to part a$,$ critically discuss the merits and drawbacks of the Activity Based Costing method. You may wish to refer to any relevant literature.

c$)$ Explain the ways in which management accountants can be useful to an organisation and how they are able to add value, you can refer to part a and b above to support your answer.