Question

Garfield 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: Budgeted Activity Cost Activity Activity Base Casting $142,926 Machine hours Assembly 57,741 Direct labor hours Inspecting 19,912 Number of inspections Setup 24,300 Number of setups dling Materials handling 32,452 Number of loads

Answer 1

Answer

• Calculation of activity rates

		Activity Drivers
	Overhead cost	Entry	Dining	Total		Activity rates
Casting	$142,926	2,456	1,030	3486	machine hours	$41.00	per machine hours
Assembly	$57,741	840	2,199	3039	DLHs	$19.00	per DLHs
Inspecting	$19,912	758	290	1048	no. of inspections	$19.00	per no. of inspections
Setup	$24,300	174	51	225	no. of setups	$108.00	per no. of setups
Material handling	$32,452	638	216	854	no. of loads	$38.00	per no. of loads

• #1[ ENTRY]

ENRTY
	Activity base usage		Activity rate		Activity cost
Casting	2,456	machine hours	$41.00	per machine hours	$100,696
Assembly	840	DLHs	$19.00	per DLHs	$15,960
Inspecting	758	no. of inspections	$19.00	per no. of inspections	$14,402
Setup	174	no. of setups	$108.00	per no. of setups	$18,792
Material handling	638	no. of loads	$38.00	per no. of loads	$24,244
Total Activity Cost					$174,094
Total units					6,432
Activity Cost per unit					$          27.07

• #2: DINING

DINING
	Activity base usage		Activity rate		Activity cost
Casting	1,030	machine hours	$41.00	per machine hours	$42,230
Assembly	2,199	DLHs	$19.00	per DLHs	$41,781
Inspecting	290	no. of inspections	$19.00	per no. of inspections	$5,510
Setup	51	no. of setups	$108.00	per no. of setups	$5,508
Material handling	216	no. of loads	$38.00	per no. of loads	$8,208
Variable Expenses					$103,237
Contribution margin					2,200
Units sold					$          46.93