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 their associated budgeted activity costs and activity bases are as follows: Activity Budgeted Activity Cost Activity Base Casting $346,150 Machine hours Assembly 214,130 Direct labor hours Inspecting 37,600 Number of inspections Setup 38,920 Number of setups Materials handling 31,590 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 5,240 4,650 9,890 Direct labor hours 4,510 6,760 11,270 Number of inspections 1,790 560 2,350 Number of setups 230 50 280 Number of loads 640 170 810 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 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

Solutions:

H 9 Activity cost pool Casting Assembly Inspecting Setups Materials handling Computation of Activity rates Activity costs Total activity usageActivity Rate $346,150 9890 $35.00 Per machine hour $214,130 11270 $19.00 per DLH $37,600 2350 $16.00 per inspection $38,920 280 $139.00 per setup $31,590 810 $39.00 per load 10 11 12 13 15 16 17 5240 18 19 Activity Casting Assembly Inspecting Setups Materials handling Entry Lighting Fixtures Activity base usagActivity rate Activity cost $35.00 $183,400 4510 $19.00 $85,690 1790 $16.00 $28,640 230 $139.00 $31,970 640 $39.00 $24,960 20 21 23 24 Total Activity Cost Number of units Activity cost per unit $354,660 10400 $34.10 26 27 28 29 30 31 32 Activity Casting Assembly Inspecting Setups Materials handling Dining Room Lighting Fixtures Activity base usagActivity rate Activity cost 4650 $35.00 $162,750 6760 $19.00 $128,440 560 $16.00 $8,960 $139.00 $6,950 170 $39.00 $6,630 33 34 50 35 36 37 38 39 Total Activity Cost Number of units Activity cost per unit $313,730 5200 $60.33 42 44 48 49 50 51 52 Sheet62 (4) Sheet225 Sheet64 Sheet65 She