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13-29 Target Costing Bowman Specialists Inc. (BSI) manufactures specialized equipment for polishing optical lenses. There are two models—one (A-25) principally used for fine eyewear and the other (A-10) for lenses used in binoculars, cameras, and similar equipment. The following table shows the manufacturing cost of each unit is calculated, using activity-based costing, for these manufacturing cost pools. Cost Pools Allocation Base Costing Rate Materials handling Number of parts $2.25 per part Manufacturing supervision Hours of machine time $23.50 per hour Assembly Number of parts $2.55 per part Machine setup Each setup $44.60 per setup Inspection and testing Logged hours $35.00 per hour Packaging Logged hours $15.00 per hour urs BSI currently sells the A-10 model for $1,050 and the A-25 model for $725. Manufacturing costs and activity usage for the two products follow:

Answer 1

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Cost and Activity Usage for Each Product Current A-10 A-25 143.76 $ 66.44 Direct Materials Numberof parts 121 92 Machine hours Inspecting hours Packing hours Number of setups 0.6 0.7 0.4 2 Activity-based Costs Rate 143.76 $ 66.44 Direct Materials $ 2.25 Materials Handling 272.25 207.00 Mfg Supervision 23.50 141.00 94.00 Assembly 308.55 2.55 234.60 Number of Setups 44.60 89.20 44.60 21.00 35.00 35.00 Inspection and Test Packaging 15.00 10.50 6.00 Total 1,000.26 $ 673.64 1,050.00 $ 725.00 Price 49.74 $ 51.36 Margin