Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models...
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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
$
4.10
per part
Manufacturing supervision
Hours of machine time
$
14.97
per hour
Assembly
Number of parts
$
4.15
per part
Machine setup
Each setup
$
57.35
per setup
Inspection and testing
Logged hours
$
46.35
per hour
Packaging
Logged hours
$
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:
B-13
F-32
Direct materials
$
165.35
$
76.28
Number of parts
177
137
Machine hours
8.75
4.37
Inspection time
3.40
2.50
Packaging time
1.75
1.35
Setups
2
1
The product cost for model F-32 is:
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