Chapter 4 A Calculator eBook 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 1. EX.04.01 follows: Budgeted 2. EX.04.02 Activity Activity Cost Activity Base 3. EX.04.06 Casting $338,910 Machine hours Assembly 163,940 Direct labor hours 4. EX.04.11.ALGO Inspecting 27,500 Number of inspections Number of setups Setup 34,250 Materials handling Number of loads 38,400 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 Dining Entry Total <) Machine hours 5,440 4,830 10,270 Direct labor hours 4,680 7,030 11,710 Number of inspections 1,900 600 2,500 Number of setups 200 50 250 Number of loads 200 760 960 Units produced 10,800 5,400 16,200 a. Determine the activity rate for each activity. If required, round the rate to the nearest dollar. Activity Activity Rate 33 v per machine hour Casting per direct labor hour V Assembly 14 11 V per inspection Inspecting 137 V per setup Setup 40 v per load Materials handling 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. Activity Cost Per Unit Product Total Activity Cost $ 323,740 V Entry Lighting Fixtures 279,260 Dining Room Lighting Fixtures
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 Costing
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 | $338,910 | Machine hours | |
| Assembly | 163,940 | Direct labor hours | |
| Inspecting | 27,500 | Number of inspections | |
| Setup | 34,250 | Number of setups | |
| Materials handling | 38,400 | 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 | 5,440 | 4,830 | 10,270 | |||
| Direct labor hours | 4,680 | 7,030 | 11,710 | |||
| Number of inspections | 1,900 | 600 | 2,500 | |||
| Number of setups | 200 | 50 | 250 | |||
| Number of loads | 760 | 200 | 960 | |||
| Units produced | 10,800 | 5,400 | 16,200 |
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 | $ | $ |
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