Question

#1

Activity Rates and Product Costs using Activity-Based Costing

Garfield Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows:

Activity	Budgeted Activity Cost		Activity Base
Casting	$316,470		Machine hours
Assembly	163,950		Direct labor hours
Inspecting	22,680		Number of inspections
Setup	44,950		Number of setups
Materials handling	45,500		Number of loads

Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow:

Activity Base	Entry		Dining		Total
Machine hours	5,080		4,510		9,590
Direct labor hours	4,370		6,560		10,930
Number of inspections	1,440		450		1,890
Number of setups	230		60		290
Number of loads	720		190		910
Units produced	10,200		5,100		15,300

a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.

Activity	Activity Rate
Casting	$	per machine hour
Assembly	$	per direct labor hour
Inspecting	$	per inspection
Setup	$	per setup
Materials handling	$	per load

b. Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round the per unit rates to the nearest cent.

Product	Total Activity Cost	Activity Cost Per Unit
Entry Lighting Fixtures	$	$
Dining Room Lighting Fixtures	$	$

Answer 1

			A	B	A/B
		Activity	Budgeted Cost	Total Activity Level	Activity Rate
		Casting	316470	9590	33.00	per machine hour
		Assembly	163950	10930	15.00	per direct labor hour
		Inspecting	22680	1890	12.00	per inspection
		Setup	44950	290	155.00	per setup
		Materials handling	45500	910	50.00	per load
	A	Activity	Activity Rate
		Casting	33.00	per machine hour
		Assembly	15.00	per direct labor hour
		Inspecting	12.00	per inspection
		Setup	155.00	per setup
		Materials handling	50.00	per load
	B	Allocation to Products:
			Activity Level			Activity Level*Activity Rate
		Activity	Entry Lighting Fix	Dinning Room Lighting Fix	Activity Rate	Entry Lighting Fix	Dinning Room Lighting Fix
		Casting	5080	4510	33.00	167640	148830
		Assembly	4370	6560	15.00	65550	98400
		Inspecting	1440	450	12.00	17280	5400
		Setup	230	60	155.00	35650	9300
		Materials handling	720	190	50.00	36000	9500
				Total Activity Cost		322120	271430
				Units		10200	5100
				Activity Cost PU		31.58	53.22