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	$	2.40	per part
Manufacturing supervision	Hours of machine time	$	14.80	per hour
Assembly	Number of parts	$	3.30	per part
Machine setup	Each setup	$	56.50	per setup
Inspection and testing	Logged hours	$	45.50	per hour
Packaging	Logged hours	$	19.50	per hour

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

	B-13				F-32
Direct materials	$	164.50			$	75.60
Number of parts		160				120
Machine hours		7.90				4.20
Inspection time		1.70				0.80
Packaging time		0.90				0.50
Setups		3				2

If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 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)	$	80			$	120
B)	$	1,378			$	125
C)	$	318			$	856
D)	$	1,378			$	856
E)	$	318			$	422

Multiple Choice

• Option C

• Option E

• Option A

• Option D

• Option B