Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one
Question:
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). The manufacturing cost of each unit is calculated using activity-based costing; using the following manufacturing cost pools.
Cost Pools | Allocation Base | Costing Rate |
1. Materials handling | Number of parts | $2.40 per part |
2. Manufacturing supervision | Hours of machine time | $14.80 per hour |
3. Assembly | Number of parts | $3.30 per part |
4. Machine setup | Each setup | $56.50 per setup |
5. Inspection and testing | Logged hours | $45.50 per hour |
6. Packaging | Logged hours | $19.50 per hour |
LCI currently sells the B-13 model for $1,925 and the F-32 model for $982. Manufacturing costs and activity usage for the two products are as follows:
B-13 | F-32 | |
Direct materials | $188.50 | $109.90 |
Number of parts | 195 | 115 |
Machine Hours | 8.5 | 8.2 |
Inspection time | 1.75 | 1.25 |
Packaging time | 0.75 | 0.5 |
Set-ups | 4 | 1 |
7) The product cost for model B-13 is calculated to be:
Answer: ___________________
8) The product cost for model F-32 is calculated to be:
Answer: ___________________
9) The product margin for model B-13 is calculated to be:
Answer: _____________________
10) The product margin for model F-32 is calculated to be:
Answer: ______________________
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins