Question

1. 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:

   Activity	Budgeted Activity Cost		Activity Base
   Casting	$325,710		Machine hours
   Assembly	202,500		Direct labor hours
   Inspecting	33,150		Number of inspections
   Setup	36,480		Number of setups
   Materials handling	42,750		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	5,230		4,640		9,870
   Direct labor hours	4,500		6,750		11,250
   Number of inspections	1,680		530		2,210
   Number of setups	190		50		240
   Number of loads	750		200		950
   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 amounts to the nearest cent.

   Product	Total Activity Cost	Activity Cost Per Unit
   Entry Lighting Fixtures	$	$
   Dining Room Lighting Fixtures	$	$

Answer 1

a. Activity rates for each activity [Refer working note 1]
Casting	$33	per machine hour
Assembly	$18	per direct labor hour
Inspecting	$15	per inspection
Setup	$152	per setup
Materials handling	$45	per load
b. Total and per-unit activity costs
Product	Total Activity Cost [Refer working note 2]	Activity Cost Per Unit [Refer working note 3]
Entry Lighting Fixtures	$341,420	$32.83
Dining Room Lighting Fixtures	$299,170	$57.53

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Working note 1 - Calculation of Activity rate
Activity	Budgeted activity cost (a)	Activity usage (b)	Activity rate (a / b)
Casting	$325,710	9,870	machine hours	$33	per machine hour
Assembly	$202,500	11,250	direct labor hours	$18	per direct labor hour
Inspecting	$33,150	2,210	inspections	$15	per inspection
Setup	$36,480	240	setups	$152	per setup
Materials handling	$42,750	950	loads	$45	per load

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Working note 2 - Calculation of total activity costs associated with each product
Activity	Activity Rate [Refer working note 1]	Entry Lighting Fixtures	Dining Room Lighting Fixtures
Activity usage	Allocation of activity cost	Activity usage	Allocation of activity cost
	(a)	(b)	(a x b)	(c)	(a x c)
Casting	$33	per machine hour	5,230	machine hours	$172,590	4,640	machine hours	$153,120
Assembly	$18	per direct labor hour	4,500	direct labor hours	$81,000	6,750	direct labor hours	$121,500
Inspecting	$15	per setup	1,680	inspections	$25,200	530	inspections	$7,950
Setup	$152	per inspection	190	setups	$28,880	50	setups	$7,600
Materials handling	$45	per load	750	loads	$33,750	200	loads	$9,000
Total activity cost assigned	$341,420		$299,170

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Working note 3 - Computation of per-unit activity costs associated with each product
	Entry Lighting Fixtures	Dining Room Lighting Fixtures
Total activity cost allocated        [Refer working note 2]             (a)	$341,420	$299,170
Production ( In units)                                                                     (b)	10,400	5,200
Overhead cost per unit                                                (a / b)	$32.83	$57.53