Lightsquare Inc. manufactures entry and dining room lighting fixtures. Five acti

Question

Lightsquare 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:

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:

Budgeted Activity Activity Cost Activity Base Casting $130,254 Machine hours Assembly 54,986 Direct labor hours Inspecting 18,870 Number of inspections Setup 35,400 Number of setups Materials handling 24,710 Number of loads

Explanation / Answer

Answer:-(A) Calculation of overhead rate for each activity of Light square Inc. :-

                                        = $130254/3831 = $34 per machine hour

    2)-Assembly cost=Total activity cost/ Number of direct labor hours

                              = $54986/2894 = $19 per direct labor hour

    3)-Inspecting cost = Total activity cost/ Number of inspections

                                = $18870/1110 =$17 per inspection

    4)- Set up cost = Total activity cost/ Number of set ups

                                = $35400/236 =$150 per set up

    5)- Material handling costs=Total activity cost/ Number of loads

                                = $24710/706 =$35 per load

(B)-

Lightsquare Inc. Calculation of total & per unit activity cost of each product Particluars Entry Dinning Total $ $ $ Casting costs 2844 machine hours*$34 per machine hour=96696 987 machine hours*$34 per machine hour=33558 130254 Assembly costs 804 Direct Labor Hours*$19 per Direct Labor Hour=15276 2090 Direct Labor Hours*$19 per Direct Labor Hour=39710 54986 Inspecting costs 807 inspections*$17 per inspection=13719 303 inspections*$17 per inspection=5151 18870 Set up costs 177 setups*$150 per set up=26550 59 setups*$150 per set up=8850 35400 Material handling costs 481 loads*$35 per load=16835 225 loads*$35 per load=7875 24710 Total activity costs (a) 169076 95144 264220 Number of units (b) 6192 2127 8319 Activity cost per unit (c=a/b) 27.31 44.73 31.76

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