Financial and Managerial Accounting: E11-11 Contemporary Lighting Inc. manufactures entry

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Financial and Managerial Accounting

Ex11-11 Activity rates and product costing 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:
Activity Budgeted Activity Cost Activity Base
Casting 136,800 Machine hours
Assembly 71,100 Direct labor hours
Inspecting 23,680 Number of inspections
Setup 43,800 Number of setups
Materials handling 46,350 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 are provided in the table below.
Activity Base Entry Dining Total
Machine hours 3,120 1,440 4,560
Direct labor hours 1,200 2,750 3,950
Number of inspections 1,080 400 1,480
Number of setups 220 72 292
Number of loads 730 300 1,030
Units produced 9,015 3,085 12,100

a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.
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.
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