Bowman Specialists Inc. (BSI) manufactures specialized equipment for polishing optical lenses. There are two modelsone (A25) principally used for fine eyewear and the other (A10) for lenses used in binoculars, cameras, and similar equipment. The manufacturing cost of each unit is calculated, using activity-based costing, for these manufacturing cost pools:

Cost Pools

Allocation Base

Costing Rate

Materials handling

Number of parts

$

3.70

per part

Manufacturing supervision

Hours of machine time

$

24.20

per hour

Assembly

Number of parts

$

6.00

per part

Machine setup

Each setup

$

48.00

per setup

Inspection and testing

Logged hours

$

56.00

per hour

Packaging

Logged hours

$

26.00

per hour

BSI currently sells the A10 model for $2,000 and the A25 model for $1,415. Manufacturing costs and activity usage for the two products follow:

A10 A25

Direct materials $147.76 $73.44

Number of parts 130 101

Machine-hours 8.7 5.8

Inspection time 1.9 1.05

Packing time 1.15 0.58

Setups 4.16 1.9

1.	Calculate the product cost and product margin for each product. (Round your answers to 2 decimal places.)

2-a.

A new competitor has entered the market for lens-polishing equipment with a superior product at significantly lower prices, $1,800 for the A10 model and $1,315 for the A25 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:

A10A25

Direct materials$96.65 $51.45

Number of parts 128 99

Machine-hours 9.5 3.8

Inspection time 1.9 0.95

Packing time 0.97 0.38

Setups 1.9 1.9

Calculate the total product costs with the new activity usage data. (Round your answers to 2 decimal places.)