Activity
Activity Costs
(Budgeted)
Activity Base
Casting $42,000 Machine hours
Assembly 13,500 Direct labor hours
Inspecting 5,800 Number of inspections
Setup 16,800 Number of setups
Materials handling 3,600 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 for each product and in total are provided in the table below.
Activity Base | Entry | Dining | Total
Machine hours | 800 | 600 | 1,400
Direct labor hours | 500 | 400 | 900
Number of inspections. | 140 | 150 | 290
Number of setups | 80 | 60 | 140
Number of loads | 50 | 40 | 90
Units produced | 1,200 | 500 | 1,700
a. Determine the activity rate for each activity.
b. Use the activity rates in (a) to determine the total and per unit activity costs associated with each product.
Answer:
Estimated Total
Activity Activity- Activity
Cost ÷ Base Usage = Rate
Casting $42,000 1,400 mh $30 /mh
Assembly 13,500 900 dlh $15 /dlh
Inspecting 5,800 290 insp. $20 /insp.
Setup 16,800 140 setups $120 /setup
Materials handling 3,600 90 loads $40 /load
Activity
Entry Lighting Fixtures Dining Room Lighting Fixtures
Activity-
Base Activity Activity
Usage × Rate = Cost
Casting 800 mh $30 /mh $24,000 600 mh $30 /mh $18,000
Assembly 500 dlh $15 /dlh 7,500 400 dlh $15 /dlh 6,000
Inspecting 140 insp. $20 /insp. 2,800 150 insp. $20 /insp. 3,000
Setup 80 setups $120 /setup 9,600 60 setups $120 /setup 7,200
Materials handling 50 loads $40 /load 2,000 40 loads $40 /load 1,600
Total activity cost $45,900 $35,800
÷ Number of units ÷ 1,200 ÷ 500
Activity cost per unit $ 38.25 $ 71.60
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