Lens Care Incorporated (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: Costing Rate Cost Pools Allocation Base Materials handling Number of parts $ 4.10 per part Manufacturing supervision Hours of machine time $ 14.97 per hour Assembly Machine setup Inspection and testing Packaging Number of parts Each setup Logged hours Logged hours $ 4.15 per part $ 57.35 per setup $ 46.35 per hour $ 20.35 per hour LCI currently sells the B-13 model for $5,600 and the F-32 model for $5,980. Manufacturing costs and activity usage for the two products are as follows: Direct materials Number of parts Machine hours Inspection time Packaging time Setups B-13 $ 165.35 F-32 $ 76.28 177 137 8.75 4.37 3.40 2.50 1.75 2 1.35 1 If the market price for B-13 and F-32 are reduced to $5,520 and $5,855 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)? A) B-13 $ 686.00 F-32 $ 612.00 R) $ 1 984 aa $ 617 00
Lens Care Incorporated (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: Costing Rate Cost Pools Allocation Base Materials handling Number of parts $ 4.10 per part Manufacturing supervision Hours of machine time $ 14.97 per hour Assembly Machine setup Inspection and testing Packaging Number of parts Each setup Logged hours Logged hours $ 4.15 per part $ 57.35 per setup $ 46.35 per hour $ 20.35 per hour LCI currently sells the B-13 model for $5,600 and the F-32 model for $5,980. Manufacturing costs and activity usage for the two products are as follows: Direct materials Number of parts Machine hours Inspection time Packaging time Setups B-13 $ 165.35 F-32 $ 76.28 177 137 8.75 4.37 3.40 2.50 1.75 2 1.35 1 If the market price for B-13 and F-32 are reduced to $5,520 and $5,855 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)? A) B-13 $ 686.00 F-32 $ 612.00 R) $ 1 984 aa $ 617 00
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Transcribed Image Text:Lens Care Incorporated (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:
Costing Rate
Cost Pools
Allocation Base
Materials handling
Number of parts
$ 4.10 per part
Manufacturing supervision
Hours of machine time
$ 14.97 per hour
Assembly
Machine setup
Inspection and testing
Packaging
Number of parts
Each setup
Logged hours
Logged hours
$ 4.15 per part
$ 57.35 per setup
$ 46.35 per hour
$ 20.35 per hour
LCI currently sells the B-13 model for $5,600 and the F-32 model for $5,980. Manufacturing costs and activity usage for the two products
are as follows:
Direct materials
Number of parts
Machine hours
Inspection time
Packaging time
Setups
B-13
$ 165.35
F-32
$ 76.28
177
137
8.75
4.37
3.40
2.50
1.75
2
1.35
1
If the market price for B-13 and F-32 are reduced to $5,520 and $5,855 respectively, and Lens Care wants to maintain market share and
profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)?
A)
B-13
$ 686.00
F-32
$ 612.00
R)
$ 1 984 aa
$ 617 00
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