Question

Activity rates and product costs using activity-based costing

Lonsdale 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	$520,000		Machine hours
Assembly	91,000		Direct labor hours
Inspecting	36,000		Number of inspections
Setup	42,750		Number of setups
Materials handling	42,750		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	6,320		13,680		20,000
Direct labor hours	3,900		2,600		6,500
Number of inspections	290		710		1,000
Number of setups	270		180		450
Number of loads	500		450		950
Units produced	4,300		3,700		8,000

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

1. 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

2. 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

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