Question
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
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 PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.50per partManufacturing supervisionHours of machine time$14.81per hourAssemblyNumber of parts$3.35per partMachine setupEach setup$56.55per setupInspection and testingLogged hours$45.55per hourPackagingLogged hours$19.55per hour
LCI currently sells the B-13 model for $2,000 and the F-32 model for $1,500. Manufacturing costs and activity usage for the two products are as follows:
B-13F-32Direct materials$164.55$75.64Number of parts161121Machine hours7.954.21Inspection time1.800.90Packaging time0.950.55Setups43
The product cost for model B-13 is:
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