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 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 per part
Machine setup	Each setup	$56.50 per setup
Inspection and testing	Logged hours	$45.50 per hour
Packaging	Logged hours	$19.50 per hour

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

	B-13	F-32
Direct materials	$164.50	$75.60
Number of parts	160.00	120.00
Machine hours	7.90	4.20
Inspection time	1.70	0.80
Packaging time	0.90	0.50
Setups	3.00	2.00

he product cost for model B-13 is:

Answer 1

Answer- The product cost for model B-13 is =$1457.82.
Explanation-

LENS CARE INC.
CALCULATION OF PRODUCT COST OF B-13
PARTICULARS		AMOUNT
		$
Direct materials		164.50
Materials handling	$2.40 per part*160 parts	384.00
Manufacturing supervision	$14.80 per hour*7.90 hours	116.92
Assembly	$3.30 per part*160 parts	528.00
Machine setup	$56.50 per setup*3 setups	169.50
Inspection and testing	$45.50 per hour*1.70 hours	77.35
Packaging	$19.50 per hour*0.90 hours	17.55
Total product costs		1457.82