This activity primarily focuses on fine motor skills and hand strengthening. You can grade this project to involve as many skills as necessary.
Pretend the play-doh is the dough to make your cake. To develop hand strength and increase joint compression have the child roll, and push flat with both hands or rolling pin.
Once the cake is established have the child push the candles/cut straws (of whatever size, length, and color desired) into the play-doh, and decorate as wanted (sprinkle sequins or rice for sprinkles).
After you sing and blow out the candles, have the child remove the straws. With the straws that have “cake” stuck in them, have the child use an unbent paper clip/pipe cleaner (depending on straw width) and poke it out from the other end. Sometimes you can get it out by pinching at it after pushing a little out.
If working on utensil manipulation, have the child cut up the cake with a plastic knife, serve to a group (for socialization), and fake eat with a plastic fork.