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 The market price for B-13 and F-32 are reduced to $1,695 and $1,095 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)?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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	$	2.40	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

The market price for B-13 and F-32 are reduced to $1,695 and $1,095 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)?

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