Question

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models one mainly used for fine eyewear (F-32) and a equipment (B-13) The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Inspection and testing Packaging Allocation Base Number of parts Hours of machine t Number of parts Each setup Logged hours Logged hours Costing Rate $ 4.ee per part $ 14.96 per hour $ 4.19 per part $57.30 per setup $ 46.30 per hour $ 20.30 per hour LCI currently sells the B-13 model for $5,375 and the F-32 model for $5,700 Manufacturing costs and activity usage for the two products are as follows $ $165.30 176 8.7e 76.24 136 Direct materials Number of parts Machine hours Inspection time Packaging time Setups 1.30 The product cost for model F 32 is Multiple Choice $2,086 69 < Prev 36 E nd >

Answer 1

We have to calculate the product cost for F-32. For this purpose, we will add material cost and overhead cost based on
activity rates are given in the question
Cost component	Allocation driver	Activity level	Activity allocation rate	Total cost
Material				$             76.24
Material handling	No of parts	136.00	$                 4.00	$           544.00
Manufacturing supervision	Machine hours	4.36	$               14.96	$             65.23
Assembly	No of parts	136.00	$                 4.10	$           557.60
Machine setup	Each setup	4.00	$               57.30	$           229.20
Inspection and testing	logged hours	2.40	$               46.30	$           111.12
Packaging	logged hours	1.30	$               20.30	$             26.39
Total product cost				$       1,609.78