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Activity rates and product costs using activity-based costing Lonsdale Inc. manufactures entry and dining room lighting...

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 $352,000   Machine hours
Assembly 85,500   Direct labor hours
Inspecting 33,600   Number of inspections
Setup 36,000   Number of setups
Materials handling 29,450   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 5,050 10,950 16,000
Direct labor hours 2,700 1,800 4,500
Number of inspections 210 840 1,050
Number of setups 240 160 400
Number of loads 240 710 950
Units produced 3,700 3,800 7,500
  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 $   $  

Solutions

Expert Solution

a) The activity rate for each activity is:-

Activity Budgeted Cost Total Base Activity Rate
Casting 352000 16000 $                   22.00
Assembly 85500 4500 $                   19.00
Inspecting 36600 1050 $                   34.86
Setup 36000 400 $                   90.00
Materials handling 29450 950 $                   31.00
Activity Activity Rate
Casting $           22.00 per machine hour
Assembly $           19.00 per direct labor hour
Inspecting $           34.86 per inspection
Setup $           90.00 per setup
Materials handling $           31.00 per load

b) The total and per-unit activity costs associated with each product is:-

Particular Entry Lighting Fixture Dining Room Lighting Fixture
Activity Activity Base Activity Rate Total Cost Base Hours Activity Rate Total Cost
Casting 5050 22 $ 111,100.00 10950 22 $ 240,900.00
Assembly 2700 19 $    51,300.00 1800 19 $    34,200.00
Inspecting 210 34.86 $      7,320.60 840 34.86 $    29,282.40
Setup 240 90 $    21,600.00 160 90 $    14,400.00
Materials handling 240 31 $      7,440.00 710 31 $    22,010.00
Total Cost $ 198,760.60 $ 340,792.40

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