Required: 1. Calculate the product cost and product margin for each product. 2. A new competitor has entered the market for lens-polishing equipment with a superior product at significantly lower prices, $940 for the A-10 model and $685 for the A-25 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-25 $ 51.45 Direct materials Number of parts Machine-hours Inspection time Packing time Setups A-10 $ 87.65 110 81 5.0 2.0 1.0 0.50 0.70 1 0.20 1 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? 3. Assume the information in requirement 2, but further assume that BSI management is not satisfied with the gross margin on the A-10 after the cost improvements. BSI wants a minimum of $85 gross margin on A-10. Suppose you are able to change the number of parts to reduce costs further. 4. What cost management method might be useful to BSI at this time? Bowman Specialists Incorporated (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 how the manufacturing cost of each unit is calculated, using activity-based costing, for these manufacturing cost pools. Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Allocation Base Number of parts Hours of machine time Number of parts Each setup Costing Rate $2.25 per part Inspection and testing Packaging Logged hours Logged hours $ 24.10 per hour $ 3.15 per part $ 50.60 per setup $ 35.00 per hour $ 15.00 per hour BSI currently sells the A-10 model for $1,230 and the A-25 model for $815. Manufacturing costs and activity usage for the two products follow: Direct materials Number of parts Machine hours Inspection time Packing time Setups A-10 $ 152.76 A-25 $ 75.44 121 92 6.00 4.00 1.00 0.60 0.70 0.40 2 1