Timothy Cake Company manufactures and sells three flavours of small cakes: chocolate, apple, and cream. The batch size for the cakes is limited to 1,000 cakes per batch based on the size of the ovens and cake moulds owned by the company. Based on budgetary projections, the information listed below is available:

	Chocolate	Apple	Cream
Projected sales in units	500,000	800,000	600,000
PER CAKE data: Selling price	$0.80	$0.75	$0.60
Direct materials	$0.20	$0.15	$0.14

Direct labour	$0.04	$0.02	$0.02
Hours per 1000-cake batch:
Direct labour hours	2	1	1
Oven hours	1	1	1
Packaging hours	0.5	0.5	0.5

Total overhead costs and activity levels for the year are estimated as follows:

Activity	Overhead costs		Activity levels
Direct labour			2,400 hours
Oven	$210,000	1,900 oven hours
Packaging	$150,000	950 packaging hours

a) Using a traditional costing system (with direct labour hours as the overhead allocation base), for the chocolate cake, calculate the estimated overhead costs per thousand cakes and the estimated operating profit per thousand cakes.

b) Explain the difference between the profits obtained from the traditional costing system and the ABC system. In doing so, briefly explain which system provides a better estimate of profitability and why.