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Activity rates The estimated activity cost divided by estimated activity-base usage. and product costs using activity-based costing Lightsquare Inc. manufactures entry and dining room lighting

Activity ratesThe estimated activity cost divided by estimated activity-base usage. and product costs using activity-based costing

Lightsquare Inc. manufactures entry and dining room lighting fixtures. Five activities

The types of work, or actions, involved in a manufacturing process or service activity.

are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases

A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior. Activity bases are also used in the denominator in calculating the predetermined factory overhead rate to assign overhead costs to cost objects.

are as follows:

Budgeted

Activity

Activity Cost

Activity Base

Casting

$127,750

Machine hours

Assembly

63,200

Direct labor hours

Inspecting

21,330

Number of inspections

Setup

28,750

Number of setups

Materials handling

31,600

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

2,500

1,150

3,650

Direct labor hours

960

2,200

3,160

Number of inspections

860

325

1,185

Number of setups

An overhead activity that consists of changing tooling in machines in preparation for making a new product.

170

60

230

Number of loads

570

220

790

Units produced

5,541

2,128

7,669

A.

Determine the activity rate for each activity. Enter these rates in the Activity Rate column.

Entry Lighting Fixtures

Activity

Activity-

Base

Activity

Activity

Usage

X

Rate

=

Cost

Casting

Assembly

Inspecting

Setup

Materials handling

Total activity cost

Number of units

Activity cost per unit

B.

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.

Dining Room Lighting Fixtures

Activity

Activity-

Base

Activity

Activity

Usage

X

Rate

=

Cost

Casting

Assembly

Inspecting

Setup

Materials handling

Total activity cost

Number of units

Activity cost per unit

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