Activity Rates and Product Costs using Activity-Based Costing

Contemporary Lighting 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	$209,300		Machine hours
Assembly	145,180		Direct labor hours
Inspecting	22,770		Number of inspections
Setup	46,900		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 are provided in the table below.

Activity Base	Entry		Dining		Total
Machine hours	4,820		4,280		9,100
Direct labor hours	4,150		6,220		10,370
Number of inspections	1,570		500		2,070
Number of setups	280		70		350
Number of loads	700		190		890
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	$	$