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	$258,960		Machine hours
Assembly	181,600		Direct labor hours
Inspecting	32,110		Number of inspections
Setup	48,640		Number of setups
Materials handling	55,080		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	5,280		4,680		9,960
Direct labor hours	4,540		6,810		11,350
Number of inspections	1,880		590		2,470
Number of setups	310		70		380
Number of loads	850		230		1,080
Units produced	10,400		5,200		15,600

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 amounts to the nearest cent.

Product	Total Activity Cost	Activity Cost Per Unit
Entry Lighting Fixtures
Dining Room Lighting Fixtures