Smart Bee Bhd $($SBB$)$ produces three $(3)$ main products using the same production methods and equipment. At present, SBB uses a traditional product costing system, however the top management has suggested the accounting department to consider adopting an Activity Based Costing $($ABC$)$ system.

Details relating to the three $(3)$ products are: Product Material RM$/$unit Labor hour$/$unit Machine hour$/$unit Total units

X $10131,000$

Y $6321,500$

Z $12266,000$

Direct labor costs, RM$8$ per hour and production overheads are absorbed currently on a machine hour basis. Details of production overheads are as follows:

Overhead Costs

Material handling costs $100,000$

Inspection costs $191,400$

Costs relating to machining $126,000$

Set up costs $250,600$

Total $.668,000$

Further information related to production overheads are shown below:

Product No$.$ set ups No$.$ materials movements No$.$ inspections

X $13020200$

Y $15035270$

Z $42045400$

REQUIRED:

$1.$ Calculate the cost per unit for products X$,$ Y and Z using traditional basis of charging overheads. Show your calculations.

$2.$Calculate the cost per unit of each product using ABC approach of charging overheads. Show your calculations.

$3.$ Explain THREE $(3)$ reasons for differences in costs of each product calculated in $($a$)$ and $($b$).44,$ Discuss THREE $(3)$ limitations of using ABC approach.