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Bowman Specialists Inc. (BSI) manufactures specialized equipment for polishing optical lenses. There are two models-one (A-25) principally used for fine eyewear and the other (A-10) for lenses used in binoculars, cameras, and similar equipment. The following table shows the manufacturing cost of each unit is calculated, using activity-based costing, for these manufacturing cost pools Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Inspection and testing Packaging Allocation Base Number of parts Hours of machine time Number of parts Each setup Logged hours Logged hours Costing Rate 3.45 per part 524.30 per hour S 4.95 per part $47.80 per setup 559.00 per hour 531.00 per hour BSI currently sells the A-10 model for $2,730 and the A-25 model for $1,695. Manufacturing costs and activity usage for the two products follow: A-25 137.76 $74.44 100 5.60 1.00 0.56 A-10 Direct materials Number of parts Machine-hours Inspection time Packing time Setups 129 8.40 1.80 1.10 18 Required 1. Calculate the product cost and product margin for each product. 2. A new competitor has entered the market for lens-polishing equipment with a superior product at significantly lower prices, $2,010 for the A-10 model and $1,460 for the A-25 model. To try to compete, BSI has made some radical improvements in the design and manufacturing of its two products. The materials costs and activity usage rates have been decreased significantly, as follows: A-10 A-25 $94.65 $50.45 97 Direct materials Number of parts Machine-hours Inspection time Packing time Setups 126 0.90 0.36 0.94 9 2-a. Calculate the total product costs with the new activity usage data 2-b. Can BSI make a positive gross margin with the new costs, assuming that it must meet the price set by the new competitor? 4. What cost management method might be useful to BSI at this time? What cost management method might be useful to BSI at this time? O O O |Target costing Activity-based costing Life-cycle costing Kaizen costing