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	$	$