Question

Hello, Can you please help me answer A and B, thank you in advance.

Activity Rates and Product Costs using Activity-Based Costing

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:

Activity	Budgeted Activity Cost		Activity Base
Casting	$206,360		Machine hours
Assembly	192,420		Direct labor hours
Inspecting	32,550		Number of inspections
Setup	48,640		Number of setups
Materials handling	45,600		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	4,970		4,410		9,380
Direct labor hours	4,280		6,410		10,690
Number of inspections	1,650		520		2,170
Number of setups	310		70		380
Number of loads	750		200		950
Units produced	9,800		4,900		14,700

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

Activity	Activity 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 rates to the nearest cent.

Product	Total Activity Cost	Activity Cost Per Unit
Entry Lighting Fixtures	$	$
Dining Room Lighting Fixtures	$	$

Answer 1

a. Activity rates for each activity [Refer working note 1]
Casting	$22	per machine hour
Assembly	$18	per direct labor hour
Inspecting	$15	per inspection
Setup	$128	per setup
Materials handling	$48	per load
b. Total and per-unit activity costs
Product	Total Activity Cost [Refer working note 2]	Activity Cost Per Unit [Refer working note 3]
Entry Lighting Fixtures	$286,810	$29.27
Dining Room Lighting Fixtures	$238,760	$48.73

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Working note 1 - Calculation of Activity rate
Activity	Budgeted activity cost (a)	Activity usage (b)		Activity rate (a / b)
Casting	$206,360	9,380	machine hours	$22	per machine hour
Assembly	$192,420	10,690	direct labor hours	$18	per direct labor hour
Inspecting	$32,550	2,170	inspections	$15	per inspection
Setup	$48,640	380	setups	$128	per setup
Materials handling	$45,600	950	loads	$48	per load

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Working note 2 - Calculation of total activity costs associated with each product
Activity	Activity Rate [Refer working note 1]		Entry Lighting Fixtures			Dining Room Lighting Fixtures
			Activity usage		Allocation of activity cost	Activity usage		Allocation of activity cost
	(a)		(b)		(a x b)	(c)		(a x c)
Casting	$22	per machine hour	4,970	machine hours	$109,340	4,410	machine hours	$97,020
Assembly	$18	per direct labor hour	4,280	direct labor hours	$77,040	6,410	direct labor hours	$115,380
Inspecting	$15	per setup	1,650	inspections	$24,750	520	inspections	$7,800
Setup	$128	per inspection	310	setups	$39,680	70	setups	$8,960
Materials handling	$48	per load	750	loads	$36,000	200	loads	$9,600
Total activity cost assigned					$286,810			$238,760

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Working note 3 - Computation of per-unit activity costs associated with each product
	Entry Lighting Fixtures	Dining Room Lighting Fixtures
Total activity cost allocated        [Refer working note 2]             (a)	$286,810	$238,760
Production ( In units)                                                                     (b)	9,800	4,900
Overhead cost per unit                                                (a / b)	$29.27	$48.73