Question

C Activity Rates and Product Costs using Activity-Based Costing Lonsdale 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 $258,440 Machine hours Assembly 158,620 Direct labor hours Inspecting 25,850 Number of inspections Setup 33,120 Number of setups Materials handing 46,060 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 5.270 4,670 9,040 Direct labor hours 4,530 6,000 11,330 Number of inspections 1,790 560 2,350 Number of setups 190 50 240 Number of loads 270 210 980 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. Check My Work Preis

Answer 1

Answer a.

Casting:

Activity Rate = Budgeted Activity Cost / Budgeted Activity Base
Activity Rate = $258,440 / 9,940
Activity Rate = $26.00 per machine hour

Assembly:

Activity Rate = Budgeted Activity Cost / Budgeted Activity Base
Activity Rate = $158,620 / 11,330
Activity Rate = $14.00 per direct labor hours

Inspecting:

Activity Rate = Budgeted Activity Cost / Budgeted Activity Base
Activity Rate = $25,850 / 2,350
Activity Rate = $11.00 per inspection

Setup:

Activity Rate = Budgeted Activity Cost / Budgeted Activity Base
Activity Rate = $33,120 / 240
Activity Rate = $138.00 per setup

Materials Handling:

Activity Rate = Budgeted Activity Cost / Budgeted Activity Base
Activity Rate = $46,060 / 980
Activity Rate = $47.00 per load

Answer b.

Entry:

Total Activity Cost = $26.00 * 5,270 + $14.00 * 4,530 + $11.00 * 1,790 + $138.00 * 190 + $47.00 * 770
Total Activity Cost = $282,540

Activity Cost per unit = Total Activity Cost / Units Produced
Activity Cost per unit = $282,540 / 10,400
Activity Cost per unit = $27.17

Dining:

Total Activity Cost = $26.00 * 4,670 + $14.00 * 6,800 + $11.00 * 560 + $138.00 * 50 + $47.00 * 210
Total Activity Cost = $239,550

Activity Cost per unit = Total Activity Cost / Units Produced
Activity Cost per unit = $239,550 / 5,200
Activity Cost per unit = $46.07