Activity rates The estimated activity cost divided by estimated activity-base us
ID: 2451844 • Letter: A
Question
Activity ratesThe estimated activity cost divided by estimated activity-base usage. and product costs using activity-based costing
Lightsquare Inc. manufactures entry and dining room lighting fixtures. Five activities
The types of work, or actions, involved in a manufacturing process or service activity.
are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases
A measure of activity that is related to changes in cost. Used in analyzing and classifying cost behavior. Activity bases are also used in the denominator in calculating the predetermined factory overhead rate to assign overhead costs to cost objects.
are as follows:
Budgeted
Activity
Activity Cost
Activity Base
Casting
$127,750
Machine hours
Assembly
63,200
Direct labor hours
Inspecting
21,330
Number of inspections
Setup
28,750
Number of setups
Materials handling
31,600
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
2,500
1,150
3,650
Direct labor hours
960
2,200
3,160
Number of inspections
860
325
1,185
Number of setups
An overhead activity that consists of changing tooling in machines in preparation for making a new product.
170
60
230
Number of loads
570
220
790
Units produced
5,541
2,128
7,669
A.
Determine the activity rate for each activity. Enter these rates in the Activity Rate column.
Entry Lighting Fixtures
Activity
Activity-
Base
Activity
Activity
Usage
X
Rate
=
Cost
Casting
Assembly
Inspecting
Setup
Materials handling
Total activity cost
÷ Number of units
÷
Activity cost per unit
B.
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.
Dining Room Lighting Fixtures
Activity
Activity-
Base
Activity
Activity
Usage
X
Rate
=
Cost
Casting
Assembly
Inspecting
Setup
Materials handling
Total activity cost
÷ Number of units
÷
Activity cost per unit
Budgeted
Activity
Activity Cost
Activity Base
Casting
$127,750
Machine hours
Assembly
63,200
Direct labor hours
Inspecting
21,330
Number of inspections
Setup
28,750
Number of setups
Materials handling
31,600
Number of loads
Explanation / Answer
A Budgeted Activity Activity Cost Activity Base Total Activity Cost per Activity Casting 127,750.00 Machine hours 3,650.00 35.00 Assembly 63,200.00 Direct labor hours 3,160.00 20.00 Inspecting 21,330.00 Number of inspections 1,185.00 18.00 Setup 28,750.00 Number of setups 230.00 125.00 Materials handling 31,600.00 Number of loads 790.00 40.00 Activity Activity Base Usage Activity Rate Activity Cost Casting 3,650.00 35.00 127,750.00 Assembly 3,160.00 20.00 63,200.00 Inspecting 1,185.00 18.00 21,330.00 Setup 230.00 125.00 28,750.00 Materials handling 790.00 40.00 31,600.00 272,630.00 B Entry Activity Activity Base Usage Activity Rate Activity Cost Casting 2,500.00 35.00 87,500.00 Assembly 960.00 20.00 19,200.00 Inspecting 860.00 18.00 15,480.00 Setup 170.00 125.00 21,250.00 Materials handling 570.00 40.00 22,800.00 Total Activity Cost 166,230.00 No of units 5,541.00 Activity cost per unit 30.00 Dining Activity Activity Base Usage Activity Rate Activity Cost Casting 1,150.00 35.00 40,250.00 Assembly 2,200.00 20.00 44,000.00 Inspecting 325.00 18.00 5,850.00 Setup 60.00 125.00 7,500.00 Materials handling 220.00 40.00 8,800.00 Total Activity Cost 106,400.00 No of units 2,128.00 Activity cost per unit 50.00 Activity Base Entry Dining Total Machine hours 2,500.00 1,150.00 3,650.00 Direct labor hours 960.00 2,200.00 3,160.00 Number of inspections 860.00 325.00 1,185.00 Number of setups (An overhead activity that consists of changing tooling in machines in preparation for making a new product.) 170.00 60.00 230.00 Number of loads 570.00 220.00 790.00 Units produced 5,541.00 2,128.00 7,669.00
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