Question

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models -...

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 $ 4.40 per part
Manufacturing supervision Hours of machine time $ 15.00 per hour
Assembly Number of parts $ 4.30 per part
Machine setup Each setup $ 57.50 per setup
Inspection and testing Logged hours $ 46.50 per hour
Packaging Logged hours $ 20.50 per hour

LCI currently sells the B-13 model for $6,275 and the F-32 model for $6,820. Manufacturing costs and activity usage for the two products are as follows:

B-13 F-32
Direct materials $ 165.50 $ 76.40
Number of parts 180 140
Machine hours 8.90 4.40
Inspection time 3.70 2.80
Packaging time 1.90 1.50
Setups 6 5

If the market price for B-13 and F-32 are reduced to $6,195 and $6,695 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)?

B-13 F-32
A) $ 1,043.00 $ 948.00
B) $ 2,341.00 $ 953.00
C) $ 1,281.00 $ 1,684.00
D) $ 2,341.00 $ 1,684.00
E) $ 1,281.00 $ 1,250.00

Homework Answers

Answer #1
B-13 F-32
Market price 6195 6695
Less: Profit 3854 5011
Target cost 2341 1684
Option D $ 2,341.00 , $1,684.00 is correct
Workings:
B-13 F-32
Selling price 6275.00 6820.00
Less: Costs
Direct materials 165.50 76.40
Materials handling 792.00 616.00
Manufacturing supervision 133.50 66.00
Assembly 774.00 602.00
Machine setup 345.00 287.50
Inspection and testing 172.05 130.20
Packaging 38.95 30.75
Total costs 2421.00 1808.85
Profit 3854.00 5011.15
B-13 F-32
Materials handling =180*4.4 =140*4.4
Manufacturing supervision =15*8.9 =15*4.4
Assembly =180*4.3 =140*4.3
Machine setup =57.5*6 =57.5*5
Inspection and testing =46.5*3.7 =46.5*2.8
Packaging =20.5*1.9 =20.5*1.5
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models -...
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...
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models -...
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...
Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models -...
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...
Lloyd and Harry, Inc. is a manufacturer of briefcases. The company produces and sells two products:...
Lloyd and Harry, Inc. is a manufacturer of briefcases. The company produces and sells two products: Leather and Vinyl. Currently, the company uses a traditional costing system to allocate manufacturing overhead to production based on a predetermined manufacturing overhead rate of $100 per machine hour. Management is considering switching to activity based costing to improve costing accuracy. In their analysis of manufacturing overhead, management has identified two activities and cost pools: Product Inspection and Machining. 80% of the total budgeted...
Fluff and​ Chop, Inc. is a manufacturer of decorative pillows. The company produces and sells two​...
Fluff and​ Chop, Inc. is a manufacturer of decorative pillows. The company produces and sells two​ products: Square and Round.​ Currently, the company uses a traditional costing system to allocate manufacturing overhead to production based on machine hours. Management is considering switching to ABC to improve costing accuracy. In their analysis of manufacturing​ overhead, management has identified two activities and cost​ pools: Machining and Machine Setup.​ $96,000 of the budgeted manufacturing overhead relates to the machine setup activity. Machine setup...
Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the...
Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Direct Labor- Hours per Unit Annual Production Total Direct Labor-Hours Model N 800 XL 3.0 4,000 units 12,000 Model N 500 1.0 12,000 units 12,000 24,000 Additional information about the company follows: a. Model N 800 XL requires $90 in direct materials per unit, and Model N 500 requires $40. b. The direct labor wage...
Company A manufactures a line of high-end exercise equipment of commercial quality. Assume that the Controller...
Company A manufactures a line of high-end exercise equipment of commercial quality. Assume that the Controller has proposed changing from a traditional costing system to an activity-based costing system. The Vice-President Finance is not convinced, so she requests that the next large order for equipment be costed under both systems to compare and analyze. The company receives an order from Slim Inc, for 150 low impact treadmills, which the Controller identifies as the order to use for dual costing. The...
Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a...
Combat Fire, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume (54,000 units), half-gallon cylinder that holds 2 1/2 pounds of multi-purpose dry chemical at 480 PSI. The commercial model is a low-volume (10,200 units), two-gallon cylinder that holds 10 pounds of multi-purpose dry chemical at 390 PSI. Both products require 1.5 hours of direct labor for completion. Therefore, total...
Collins produces two models of dog beds: rectangle and square. The following information about the costs...
Collins produces two models of dog beds: rectangle and square. The following information about the costs to produce the company’s products has been provided. Category Estimated Cost Cost Driver Rectangle Square Unit-Level $293, 000 Labor Hours 200 300 Batch-Level $45, 000 Inspections 19 15 Product-Level $390,000 Storage Space 2900 sq. ft 3700 sq.ft Facility-Level $125,000 Machine Hours 4,000 7,000 a. If all costs are allocated based on machine hours, what is the rate per machine hour? b. If all costs...
Beaver Company manufactures coffee tables and uses an activity−based costing system to allocate all manufacturing conversion...
Beaver Company manufactures coffee tables and uses an activity−based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $220 in direct​ materials, and requires 5 hours of machine time to produce. The company incurs no direct labor costs. Additional information​ follows: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts $3.00 per part Machining Machine hours $4.10 per machine hour Assembling Number of parts $1.00 per part Packaging Number of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT