Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Bowman Specialists Incorporated ( BSI ) manufactures specialized equipment for polishing optical lenses. There are two models one ( A 2 5 ) principally used
Bowman Specialists Incorporated BSI manufactures specialized equipment for polishing optical lenses. There are two modelsone A principally used for fine eyewear and the other A for lenses used in binoculars, cameras, and similar equipment.
The following table shows how the manufacturing cost of each unit is calculated, using activitybased costing, for these manufacturing cost pools.
Cost Pools Allocation Base Costing Rate
Materials handling Number of parts $ per part
Manufacturing supervision Hours of machine time $ per hour
Assembly Number of parts $ per part
Machine setup Each setup $ per setup
Inspection and testing Logged hours $ per hour
Packaging Logged hours $ per hour
BSI currently sells the A model for $ and the A model for $ Manufacturing costs and activity usage for the two products follow:
A A
Direct materials $ $
Number of parts
Machine hours
Inspection time
Packing time
Setups
Required:
Calculate the product cost and product margin for each product.
A new competitor has entered the market for lenspolishing equipment with a superior product at significantly lower prices, $ for the A model and $ for the A 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 A
Direct materials $ $
Number of parts
Machine hours
Inspection time
Packing time
Setups
a Calculate the total product costs with the new activity usage data.
b Can BSI make a positive gross margin with the new costs, assuming that it must meet the price set by the new competitor?
What cost management method might be useful to BSI at this time?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Bowman Specialists Incorporated BSI Cost Analysis 1 Product Cost and Margin Existing Data ActivityBased Costing Calculations Cost Pool Allocation Base ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started