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 $570,000 Machine hours Assembly 80,000 Direct labor hours Inspecting 42,000 Number of inspections Setup 38,000 Number of setups Materials handling 23,750 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 6,000 13,000 19,000 Direct labor hours 3,000 2,000 5,000 Number of inspections 600 400 1,000 Number of setups 300 200 500 Number of loads 450 500 950 Units produced 6,000 3,000 9,000 a. Determine the activity rate for each activity. 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 $ $ Check My Work PreviousNext

Answer 1

Activity	cost	Base
Casting	$570,000	Machine hours
Assembly	80000	Labor hours
Inspecting	42000	Number of inspections
Setup	38000	Number of setups
Material Handling	23750	Number of loads
Activity Rate = Overhead Cost/Total Activity Base
Casting	$30	per amchine hour
Assembly	$16	Per labor hour
Inspecting	$42	Per Inspection
Setup	$76	per setup
Material Handling	$25	per load
Product	Total Activity Cost	Activity cost per unit
Entry	$287,250	$47.88
Dining	$466,500	$155.50