Help Please I don’t know how to solve this problem !!
This question is about Activity Based Costing.
The Peggy Playground produces children’s swing-sets.
- 4,500 swing-sets were produced in a recent production run.
- run required 1,500 machine hours, and also required four “set-ups” of equipment.
- Final inspection required 75 hours of inspection activity.
- Estimated overhead $25 per machine hr, and $3,500 per “set-up”
- $20 per inspection hour.
- Direct materials and direct labor total $500 per swing-set.
a) How do I Apply activity-bases costing and determine the amount assigned to a swing-set?
b) and For GAAP purposes, Peggy Playground applies traditional costing methods, and allocates overhead at $40 per machine hour. How much cost would be assigned to the 4,500 swing-sets? What is the per unit cost of a swing-set under the traditional approach? What might explain the higher cost assignment, and how could this influence business decision making?