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How much cost would be assigned to the ovens

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Reference no: EM132577598

Straightforward application of activity-based costing VanManufacturing Inc. produces smart pizza oven. In the current period, 750 ovens were assembled.The current production run required 1500 machine hours. The production machines require four "set-ups" for recalibration. Quality checks required 100 hours of final inspection activity. Overhead is estimated at $40 per machine hour, plus $1,000 per "set-up," and $50 per inspection hour. Direct materials and direct labor total $500 per oven.

Question (a) Apply activity-based costing and determine the amount assigned to an oven.

Question (b) For GAAP purposes, VanManufacturing applies traditional costing methods, and allocates overhead at $60 per machine hour. How much cost would be assigned to the 750 ovens? What is the per unit cost of an oven under the traditional approach? What might explain the higher cost assignment, and how could this influence business decision making?

Reference no: EM132577598

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