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.
Bowman Specialists Inc. (BSI) manufactures specialized equipment for polishing optical lenses. There are two models one (A25) principally used for fine eyewear and the other (A10) for lenses used in binoculars, cameras, and similar equipment. The following table shows the manufacturing cost of each unit is calculated, using activitybased costing, for these manufacturing cost pools. Cost Pools allocation Base Costing Rats Materials handling Number of parts 5 2.40 ggit Manufacturing Hours of machine per . . . $2 3 . 6 0 superVision time hour per Assembly Number of parts 5 2.35 part . per Machine setup Each setup $45 . 0 0 setup Inspection and per testing Logged hours $38 . 00 hour . per Packaging Logged hours 517 . 0 0 hour ' BSI currently sells the A1O model for $1,210 and the A25 model for $865. Manufacturing costs and activity usage for the two products follow: Alo Azs Direct materials $141.76 $67.44 Number of 122 93 parts "Benin\" 6 .30 4. . 20 hours Irltspectlon 1 I 10 o I 65 time Pimkmg n .75 o . 42 time Setups 4 2 ' Required: 1. Calculate the product cost and product margin for each product. 2. A new competitor has entered the market for lenspolishing equipment with a superior product at signicantly lower prices, $1,020 for the A1O model and $665 for the A25 model. To try to compete, BSI has made some radical improvements in the design and manufacturing of is two products. The materials costs and activity usage rates have been decreased signicantly, as follows: AlO A25 Direct materials $80.65 $43.45 Number of parts 112 83 Machine-hours 5.5 2.2 Inspection time 1.1 0.55 Packing time 0.73 0.22 Setups 2 2 ' 2a Calculate the total product costs with the new activity usage data. 2b. Can BSI make a positive gross margin with the new costs, assuming that it must meet the price set by the new oompetitor? 4. What cost management method might be useful to BSI at this time? Complete this question by enterlng your answers In the tabs below. - --- Calculate the product cost and product margin for each product. (Round your answers to 2 decimal places.) Product cost _ prod... margin __ Req 2A > 2a. Calculate the total product costs with the new activity usage data. 2b. Can BSI make a positive gross margin with the new costsr 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? Complete this question by enterlng your answers In the tabs below. Reg ZA Reg 23 Calculate the total product costs with the new activity usage data. (Round your answers to 2 decimal places.) Product 005* __ 2-a. Calculate the total product costs with the new activity usage data. 2b. Can BSI make a positive gross margin with the new costs, assuming that it must meet the price set by the new oompetitor?I 4. What cost management method might be useful to BSI at this time? Complete this question by enterlng your answers In the tabs below. Can BS] make a positive gross margin with the new costs, assuming that it must meet the price set by the new competitor? 5]- Eli!\" 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? Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 4 What cost management method might be useful to BSI at this time? O Target costing Activity-based costing O O Life-cycle costing Kaizen costing
