Question
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- |
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Base |
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Usage | X | Rate | = | Cost | ||||||||
Casting |
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Assembly |
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Inspecting |
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Setup |
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Materials handling |
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Total activity cost |
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Number of units |
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Activity cost per unit |
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| 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 |
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Activity | Activity- |
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Base |
| Activity |
| Activity | ||||||||
Usage | X | Rate | = | Cost | ||||||||
Casting |
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Assembly |
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Inspecting |
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Setup |
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Materials handling |
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Total activity cost |
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Number of units |
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Activity cost per unit |
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