Activity Rates and Product Costs Using Activity-Based Costing

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: Budgeted Activity Activity Cost Activity Base Casting $253,500 Machine hours Assembly 189,040 Direct labor hours Inspecting 37,800 Number of inspections Setup 34,320 Number of setups Materials handling 36,490 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 5,170 4,580 9,750 Direct labor hours 4,450 6,670 11,120 Number of inspections 2,050 650 2.700 Number of setups 190 50 240 Number of loads 700 190 890 Units produced 10,200 5,100 15,300 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar, Machine hours 5,170 4,580 9,750 Direct labor hours 4,450 6,670 11,120 Number of inspections 2,050 650 2,700 Number of setups 190 50 240 Number of loads 700 190 890 Units produced 10,200 5,100 15,300 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 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 per load Entry Lighting Fixtures Dining Room Lighting Fixtures