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
Materials handling	Number of parts	$	3.40	per part
Manufacturing supervision	Hours of machine time	$	14.90	per hour
Assembly	Number of parts	$	3.80	per part
Machine setup	Each setup	$	57.00	per setup
Inspection and testing	Logged hours	$	46.00	per hour
Packaging	Logged hours	$	20.00	per hour

LCI currently sells the B-13 model for $4,025 and the F-32 model for $4,020. Manufacturing costs and activity usage for the two products are as follows:

	B-13				F-32
Direct materials	$	165.00			$	76.00
Number of parts		170				130
Machine hours		8.40				4.30
Inspection time		2.70				1.80
Packaging time		1.40				1.00
Setups		4				3

If the market price for B-13 and F-32 are reduced to $3,945 and $3,895 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)?

	B-13				F-32
A)	$	517.00			$	489.00
B)	$	1,815.00			$	494.00
C)	$	755.00			$	1,225.00
D)	$	1,815.00			$	1,225.00
E)	$	755.00			$	791.00

Multiple Choice

• Option C

• Option E

• Option A

• Option B

• Option D