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:

ActivityBudgeted Activity Cost Activity Base

Casting$251,000 Machine hours

Assembly160,300 Direct labor hours

Inspecting27,940 Number of inspections

Setup47,120 Number of setups

Materials handling42,300 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 BaseEntryDiningTotal

Machine hours5,320 4,720 10,040

Direct labor hours4,580 6,870 11,450

Number of inspections1,930 610 2,540

Number of setups250 60 310

Number of loads740 200 940

Units produced10,600 5,300 15,900

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

ActivityActivity 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.

ProductTotal Activity CostActivity Cost Per Unit

Entry Lighting Fixtures$$

Dining Room Lighting Fixtures$$