Ch 26 Problem: 3 Contemporary Lighting Inc. manufactures entry and dining room l
ID: 2593950 • Letter: C
Question
Ch 26 Problem: 3 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: Budgeted Activity Cast $295,220 162,540 21,560 41,230 34,320 Activity Base Machine hours Direct labor hours Number of inspections Number of setups Number of loads Activity Casting Inspecting Setup Materials handling 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 Machine hours Direct labor hours Number of inspections 1,490470 1,960 Number of setups Number of loads Units produced Entry Dining Total 5,400 4,780 10,180 4,640 6,970 11,610 250 60 310 700 180 880 10,800 5,400 16,200 a. Determine the activity rate for each activity. Activity Casting Assembly Inspecting Setup Materials handling Activity Rate per machine hour per direct labor hour per inspection per setup per load Continued on the next pageExplanation / Answer
Answer:-(A) Calculation of activity rate for each activity of Contemporary Lighting Inc. :-
= $295220/10180 = $29 per machine hour
2)-Assembly cost=Total activity cost/ Number of direct labor hours
= $162540/11610 = $14 per direct labor hour
3)-Inspecting cost = Total activity cost/ Number of inspections
= $21560/1960 =$11 per inspection
4)- Set up cost = Total activity cost/ Number of set ups
= $41230/310 =$133 per set up
5)- Material handling costs=Total activity cost/ Number of loads
= $34320/880 =$39 per load
Contemporary Lighting Inc. Calculation of total & per unit activity cost of each product Particluars Entry lighting Dinning Room lighting Total $ $ $ Casting costs 5400 machine hours*$29 per machine hour=156600 4780 machine hours*$29 per machine hour=138620 295220 Assembly costs 4640 Direct Labor Hours*$14 per Direct Labor Hour=64960 6970 Direct Labor Hours*$14 per Direct Labor Hour=97580 162540 Inspecting costs 1490 inspections*$11 per inspection=16390 470 inspections*$11 per inspection=5170 21560 Set up costs 250 setups*$133 per set up=33250 60 setups*$133 per set up=7980 41230 Material handling costs 700 loads*$39 per load=27300 180 loads*$39 per load=7020 34320 Total activity costs (a) 298500 256370 554870 Number of units (b) 10800 5400 16200 Activity cost per unit (c=a/b) 27.64 47.48 34.25