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 $ 2.50 per part Manufacturing supervision Hours of machine time $ 14.81 per hour Assembly Number of parts $ 3.35 per part Machine setup Each setup $ 56.55 per setup Inspection and testing Logged hours $ 45.55 per hour Packaging Logged hours $ 19.55 per 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-13 F-32 Direct materials $ 164.55 $ 75.64 Number of parts 161 121 Machine hours 7.95 4.21 Inspection time 1.80 0.90 Packaging time 0.95 0.55 Setups 4 3 The product cost for model F-32 is:
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 $ 2.50 per part Manufacturing supervision Hours of machine time $ 14.81 per hour Assembly Number of parts $ 3.35 per part Machine setup Each setup $ 56.55 per setup Inspection and testing Logged hours $ 45.55 per hour Packaging Logged hours $ 19.55 per 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-13 F-32 Direct materials $ 164.55 $ 75.64 Number of parts 161 121 Machine hours 7.95 4.21 Inspection time 1.80 0.90 Packaging time 0.95 0.55 Setups 4 3 The product cost for model F-32 is:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 | $ | 2.50 | per part |
| Manufacturing supervision | Hours of machine time | $ | 14.81 | per hour |
| Assembly | Number of parts | $ | 3.35 | per part |
| Machine setup | Each setup | $ | 56.55 | per setup |
| Inspection and testing | Logged hours | $ | 45.55 | per hour |
| Packaging | Logged hours | $ | 19.55 | per hour |
LCI currently sells the B-13 model for $2,000 and the F-32 model for $1,500.
| B-13 | F-32 | ||||||
| Direct materials | $ | 164.55 | $ | 75.64 | |||
| Number of parts | 161 | 121 | |||||
| Machine hours | 7.95 | 4.21 | |||||
| Inspection time | 1.80 | 0.90 | |||||
| Packaging time | 0.95 | 0.55 | |||||
| Setups | 4 | 3 | |||||
The product cost for model F-32 is:
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