Activity rates and product costs using activity-based cost Idris 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 $320,620 Machine hours Assembly 182,750 Direct labor hours Inspecting 28,420 Number of inspections Setup 50,690 Number of setups Materials handling 36,540 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 5,000 4,430 9,430 Direct labor hours 4,300 6,450 10,750 Number of inspections 1,540 490 2,030 Number of setups 300 70 370 Number of loads 690 180 870 Units produced 10,000 5,000 15,000 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Open spreadsheet a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar. Activity Activity Rate Casting $fill in the blank 2 per machine hour Assembly $fill in the blank 3 per direct labor hour Inspecting $fill in the blank 4 per inspection Setup $fill in the blank 5 per setup Materials handling $fill in the blank 6 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 $fill in the blank 7 $fill in the blank 8 Dining Room Lighting Fixtures $fill in the blank 9 $fill in the blank 10
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Activity rates and product costs using activity-based cost
Idris 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 | $320,620 | Machine hours |
| Assembly | 182,750 | Direct labor hours |
| Inspecting | 28,420 | Number of inspections |
| Setup | 50,690 | Number of setups |
| Materials handling | 36,540 | 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 | 5,000 | 4,430 | 9,430 |
| Direct labor hours | 4,300 | 6,450 | 10,750 |
| Number of inspections | 1,540 | 490 | 2,030 |
| Number of setups | 300 | 70 | 370 |
| Number of loads | 690 | 180 | 870 |
| Units produced | 10,000 | 5,000 | 15,000 |
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Open spreadsheet
a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar.
| Activity | Activity Rate |
|---|---|
| Casting | $fill in the blank 2 per machine hour |
| Assembly | $fill in the blank 3 per direct labor hour |
| Inspecting | $fill in the blank 4 per inspection |
| Setup | $fill in the blank 5 per setup |
| Materials handling | $fill in the blank 6 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 | $fill in the blank 7 | $fill in the blank 8 |
| Dining Room Lighting Fixtures | $fill in the blank 9 | $fill in the blank 10 |
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