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 $ 3.60 per part Manufacturing supervision Hours of machine time $ 14.92 per hour Assembly Number of parts $ 3.90 per part Machine setup Each setup $ 57.10 per setup Inspection and testing Logged hours $ 46.10 per hour Packaging Logged hours $ 20.10 per hour LCI currently sells the B-13 model for $4,475 and the F-32 model for $4,580. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 165.10 $ 76.08 Number of parts 172 132 Machine hours 8.50 4.32 Inspection time 2.90 2.00 Packaging time 1.50 1.10 Setups 5 4 The profit margin based on manufacturing cost for model B-13 is: Multiple Choice $2,365.65. $2,464.72. $2,443.74. $2,441.25. $2,608.24.
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 $ 3.60 per part Manufacturing supervision Hours of machine time $ 14.92 per hour Assembly Number of parts $ 3.90 per part Machine setup Each setup $ 57.10 per setup Inspection and testing Logged hours $ 46.10 per hour Packaging Logged hours $ 20.10 per hour LCI currently sells the B-13 model for $4,475 and the F-32 model for $4,580. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 165.10 $ 76.08 Number of parts 172 132 Machine hours 8.50 4.32 Inspection time 2.90 2.00 Packaging time 1.50 1.10 Setups 5 4 The profit margin based on manufacturing cost for model B-13 is: Multiple Choice $2,365.65. $2,464.72. $2,443.74. $2,441.25. $2,608.24.
Cornerstones of Cost Management (Cornerstones Series)
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Chapter4: Activity-based Costing
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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 | $ | 3.60 | per part |
Manufacturing supervision | Hours of machine time | $ | 14.92 | per hour |
Assembly | Number of parts | $ | 3.90 | per part |
Machine setup | Each setup | $ | 57.10 | per setup |
Inspection and testing | Logged hours | $ | 46.10 | per hour |
Packaging | Logged hours | $ | 20.10 | per hour |
LCI currently sells the B-13 model for $4,475 and the F-32 model for $4,580.
B-13 | F-32 | ||||||
Direct materials | $ | 165.10 | $ | 76.08 | |||
Number of parts | 172 | 132 | |||||
Machine hours | 8.50 | 4.32 | |||||
Inspection time | 2.90 | 2.00 | |||||
Packaging time | 1.50 | 1.10 | |||||
Setups | 5 | 4 | |||||
The profit margin based on manufacturing cost for model B-13 is:
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