Question

Activity Rates and Product Costs uning Activity-Based Costing Garfield Inc. manufactures entry and dining room ighsng fxtures Plve activities are used in manufacturing the futures. These activities and their associated budgeted activity costs and activity bases are as follows: Budgeted Activity Activity Cost Activity Base Casting $225,170 Machine hours Assembly 200,880 Direct labor hours Inspecting 38,400 Number of inspections Setup 35,750 Number of sebups Materials handling 45,120 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the twe products. The estated activity-base usage quantites and units produced follew Activity Base Entry Dining Tetal Machine hours 5,190 4,600 9,790 Direct labor hours 4460 6,700 11,160 Number of inspections 1,950 610 2,560 Number of setups 200 50 250 Number of loads 740 200 940 Units preduced 10,400 s,200 15,600 a. Determine the activity rate for each activity. If required, reund the rate to the nearest dole Activity Activity Rate Casting per machine hour Assembly per direct labor hour Inapecting per inspection Setup per setup s Materials handling per load

Answer 1

Answer (a) Activity Rate Calcualation

a)
		Budgeted Activity cost	Activity base	Quantity of activity	Activity Rate
	Activity	a		b	a/b
	Casting	$ 225,170	Machine hours	9,790	$ 23
	Assembly	200,880	Direct labor hours	11,160	18
	Inspecting	38,400	Number of inspections	2,560	15
	Set up	35,750	Number of setups	250	143
	Material Handling	45,120	Number of loads	940	48

Answer (b) Cost Assigned Entry Lighting Fixtures and Dining room lighting fixtures

	Total Acivity Cost
				Entry Lighting Fixtures		Dining room lighting fixtures
	Activity		Activity Rate	Quantity of activity	Budgeted Activity cost	Quantity of activity	Budgeted Activity cost
			a	b	a*b	c	a*c
	Casting		$ 23	5190	$ 119,370	4600	$ 105,800
	Assembly		18	4460	$ 80,280	6700	$ 120,600
	Inspecting		15	1950	$ 29,250	610	$ 9,150
	Set up		143	200	$ 28,600	50	$ 7,150
	Material Handling		48	740	$ 35,520	200	$ 9,600
	Total Activity Cost				$ 293,020		$ 252,300
	Activity cost per unit:
			Entry Lighting Fixtures	Dining room lighting fixtures
	Total Activity cost	a	$293,020	$252,300
	Total Unit produced	b	10,400	5,200
	Cost per unit	a/b	$ 28.18	$ 48.52

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