Activity Rates and Product Costs using Activity-Based Costing Contemporary Light

Question

Activity Rates and Product Costs using Activity-Based Costing Contemporary Lighting 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 Casting Assembly Inspecting Setup 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 Machine hours Direct labor hours Number of inspections Number of setups Number of loads Units produced Activity Cost Activity Base $218,730 Machine hours 162,600 Direct labor hours 25,200Number of inspections 55,100Number of setups 43,600 Number of loads Entry Dining Total 9,510 4,340 6,50010,840 2,100 380 1,090 10,000 5,000 15,000 5,040 4,470 1,600 310 860 500 70 230

Explanation / Answer

Activity Casting 23 per machine hour Assembly 15 per direct labor hour inspecting 12 per inspection Setup 145 per setup Materials handling 40 per load activity rate = activity cost/total activity base usage overhead allocated entry Dining total Casting 115920 102810 218730 Assembly 65100 97500 162600 inspecting 19200 6000 25200 Setup 44950 10150 55100 Materials handling 34400 9200 43600 total cost 279570 225660 505230 product total cost per unit Entry lighting fixtures 279,570 27.957 or 27.96 Dining room lighting fixtures 225660 45.132 or 45.13

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