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 Activity Cost Activity Base Casting Machine hours $262,360 Assembly 213,600 Direct labor hours Number of inspections Inspecting 32,980 35,640 Number of setu ps Setup Materials handling Number of loads 44,720 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 Dining Total Entry Machine hours 9,370 4,970 4,400 Direct labor hours 10,680 4,270 6,410 Number of inspections 470 1,940 1,470 Number of setups 220 50 270 Number of loads 680 180 860 Units produced 4,900 9,800 14,700 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar. Activity Rate Activity Casting $ per machine hour Assembly $ per direct labor hour Inspecting per inspection Setup per setup Materials hand ling $ 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

Requirement 1

Activity Cost Pool	Activity rate
Casting	$             28.00	Per DLH
Assembly	$             20.00	Per machine hour
Inspection	$             17.00	Per setup
Setup	$          132.00	Per inspection
Material handling	$             52.00	Per order

Working

Calculation of Activity rates
Activity Cost Pool	Activity driver	Overhead Cost (A)	Expected Activity (B)	Activity rate (A/B)
Casting	Number of DLH	$      262,360.00	9370	$             28.00	Per DLH
Assembly	Number of machine hour	$      213,600.00	10680	$             20.00	Per machine hour
Inspection	Number of setup	$        32,980.00	1940	$             17.00	Per setup
Setup	Number of inspection	$        35,640.00	270	$          132.00	Per inspection
Material handling	Number of order	$        44,720.00	860	$             52.00	Per order

Requirement 2

	Total Activity cost	Activity Cost per unit
Entry Lighting Fixtures	$ 313950.00,0	$ 32.04
Dining room Lighting Fixtures	$          275,350.00	$ 56.19

Working

Cost assigned to Entry Lighting Fixtures
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Casting	$                     28.00	4,970.00	$       139,160.00
Assembly	$                     20.00	4,270.00	$         85,400.00
Inspection	$                     17.00	1,470.00	$         24,990.00
Setup	$                   132.00	220.00	$ 29,040.00
Material handling	$                     52.00	680.00	$ 35,360.00
Total Overheads assigned			$       313,950.00
Production			9,800.00
Overhead cost per unit			$ 32.04

.

Cost assigned to Dining room Lighting Fixtures
Activity name	Activity Rates	Activity	ABC Cost
	(A)	(B)	(A x B)
Casting	$                     28.00	4400	$       123,200.00
Assembly	$                     20.00	6410	$       128,200.00
Inspection	$                     17.00	470	$           7,990.00
Setup	$                   132.00	50	$           6,600.00
Material handling	$                     52.00	180	$           9,360.00
Total Overheads assigned			$       275,350.00
Production			4,900.00
Overhead cost per unit			$               56.19