How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $ 3.00 per part
Manufacturing supervision Hours of machine time $ 14.86 per hour
Assembly Number of parts $ 3.60 per part
Machine setup Each setup $ 56.80 per setup
Inspection and testing Logged hours $ 45.80 per hour
Packaging Logged hours $ 19.80 per hour
 

 

LCI currently sells the B-13 model for $3,125 and the F-32 model for $2,900. Manufacturing costs and activity usage for the two products are as follows:

 

  B-13   F-32
Direct materials $ 164.80     $ 75.84  
Number of parts   166       126  
Machine hours   8.20       4.26  
Inspection time   2.30       1.40  
Packaging time   1.20       0.80  
Setups   4       3  
 

 

The market price for B-13 and F-32 are reduced to $3,045 and $2,775 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

 

Multiple Choice
  •  
    13
  •  
    32
  •  
    44
  •  
    51
  •  
    23
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