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)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

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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. 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.

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