(#18-7) 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	$229,000		Machine hours
Assembly	146,160		Direct labor hours
Inspecting	28,600		Number of inspections
Setup	43,230		Number of setups
Materials handling	49,490		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	4,850		4,310		9,160
Direct labor hours	4,180		6,260		10,440
Number of inspections	1,980		620		2,600
Number of setups	270		60		330
Number of loads	800		210		1,010
Units produced	9,600		4,800		14,400

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	$	$