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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.

  1. 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 $257,250 Machine hours
    Assembly 164,220 Direct labor hours
    Inspecting 27,940 Number of inspections
    Setup 39,440 Number of setups
    Materials handling 42,720 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 5,450 4,840 10,290
    Direct labor hours 4,690 7,040 11,730
    Number of inspections 1,930 610 2,540
    Number of setups 230 60 290
    Number of loads 700 190 890
    Units produced 10,800 5,400 16,200

    a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.

    Activity Activity Rate
    Casting $fill in the blank 1 per machine hour
    Assembly $fill in the blank 2 per direct labor hour
    Inspecting $fill in the blank 3 per inspection
    Setup $fill in the blank 4 per setup
    Materials handling $fill in the blank 5 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 $fill in the blank 6 $fill in the blank 7
    Dining Room Lighting Fixtures $fill in the blank 8 $fill in the blank 9

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