Question

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	$361,550		Machine hours
Assembly	223,820		Direct labor hours
Inspecting	27,360		Number of inspections
Setup	47,950		Number of setups
Materials handling	40,020		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	5,470		4,860		10,330
Direct labor hours	4,710		7,070		11,780
Number of inspections	1,300		410		1,710
Number of setups	280		70		350
Number of loads	690		180		870
Units produced	10,800		5,400		16,200

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 amounts to the nearest cent.

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

Answer 1

a) The activity rate for each activity is as follows:

	Budgted Activity Cost (a)	Activity (b)	Activity rate (a/b)
Casting	$ 361,550	10,330 Machine hours	$35 Per machine hour
Assembly	$223,820	11,780 Direct labor hours	$19 Per direct labor hour
Inspecting	$27,360	1,710 Number of inspections	$16 Per inspection
Setup	$47,950	350 Number of setups	$137 Per setup
Materials handling	$ 40,020	870 Number of loads	$46 Per load

b) 1) The total and per-unit activity costs associated with Entry Lighting Fixtures is as follows:

                                                  Entry Lighting Fixtures

	Activity Base (a)	Activity Rate (b)	Activity Cost (a * b)
Casting	5,470	$35 Per machine hour	$191,450
Assembly	4,710	$19 Per direct labor hour	$89,490
Inspecting	1,300	$16 Per inspection	$20,800
Setup	280	$137 Per setup	$38,360
Materials handling	690	$46 Per load	$31,740
		Total Activity Cost	$371,840

            Activity Cost Per Unit = $371,840 / 10,800 Units

                                             = $34.43

b) 2) The total and per-unit activity costs associated with Dining Room Lighting Fixtures is as follows:

                                               Dining Room Lighting Fixtures

	Activity Base (a)	Activity Rate (b)	Activity Cost (a * b)
Casting	4,860	$35 Per machine hour	$170,100
Assembly	7,070	$19 Per direct labor hour	$134,330
Inspecting	410	$16 Per inspection	$6,560
Setup	70	$137 Per setup	$9,590
Materials handling	180	$46 Per load	$8,280
		Total Activity Cost	$328,860

                                 Activity Cost Per Unit = $328,860 / 5,400 Units

                                                                  = $60.9