Question

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 the associated budgeted activity costs and activity bases are as follows: Activity Budgeted Activity Cost Activity Base Casting Assembly $236,160 224,400 43,520 Inspecting Machine hours Direct labor hours Number of inspections Number of setups Number of loads Setup 48,840 48,020 Materials handling 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 5.220 4,620 9,840 Direct labor hours 4,490 6,730 11,220 Number of inspections 1,950 610 2,560 Number of setups 300 70 370 Number of loads 770 210 980 Units produced 10,400 5,200 15,600 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar Activity Activity Rate Casting per machine hour

Answer 1

a Ativity Casting Assembly Inspecting Setup Materials handling (a) Activity Cost $236,130 $224,400 $43,520 $48,840 $48,020 (b) (a), (b). Volume Activity Rate 9,840 $24.00 11,220 $20.00 2,560 $17.00 $132.00 980 $49.00 370 b) Activity costs assigned to Entry: Casting Assembly Inspecting Setup Materials handling (u) (v) Activity Activity Rate Usage $24.00 5,220 $20.00 4,490 $17.00 1,950 $132.00 $49.00 770 Total activity cost assigned #of Units produced Activity Cost per unit (u) x (v) Activity Cost $125,264 $89,800 $33,150 $39,600 $37,730 $325,544 10,400 $31.30 ($325544 / 10400 units] 300

Activity costs assigned to Dining: Casting Assembly Inspecting Setup Materials handling (v) Activity Activity Rate Usage $24.00 4,620 $20.00 6,730 $17.00 610 $132.00 70 $49.00 210 Total activity cost assigned # of Units produced Activity Cost per unit (u) x (v) Activity Cost $110,866 $134,600 $10,370 $9,240 $10,290 $275,366 5,200 $52.95 ($275366 / 5200 units)