Amalia Ltd currently manufactures and sells four products. Details of these products and relevant information are given below, for one period. Product P1 P2 P3 P4 Output (Unit) 240 200 160 240 Machine...

Amalia Ltd currently manufactures and sells four products. Details of these products and relevant information are given below, for one period.
Product                 P1            P2             P3             P4
Output (Unit)        240          200          160            240
Machine hours       8               6              4               6  (per unit)

Cost per unit:
Direct material     £80           £100         £60            £20
Direct labour        £56             £42         £28            £42

Production overheads:

Indirect material    £20,860
Indirect labour      £10,500
Rent                        £7,200
Insurance                £4,200
Depreciation           £9,240

Production overheads are currently absorbed by using a plant-wide rate per machine hour.

Required:
(a) You have been asked by the financial director to calculate the cost per unit for each product. All overhead costs are absorbed on a machine hour basis (show your workings as full as possible).


(b) Compare the traditional absorption costing approach with Activity-based costing, and discuss the reasons why Activity-based costing is considered to present a fairer valuation of the unit product cost.