one mainly used for fine eyewear (F-32) and another for lenses used in binocular

Question

one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13). re Inc. LUl)es specialized equipment for polishing optical lenses. There are two mode re are two models: The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Allocation Base Number of parts Hours of machine time Cost Pools Materials handling Manufacturing supervision Assembly Machine setup Inspection and testing Packaging Costing Rate $2.40 per part $14.80 per hour Number of parts$3.30 per part Each setup Logged hous Logged hours S56.50 per setup $45.50 per hour $19.50 per hour LCI currently sells the B-13 model for $1,775 per unit and the F-32 model for $1,220 per unit. Manufacturing costs (per unit) and activity usage (per unit) for the two products are as follows: B-13 F-32 Direct materials Number of parts Machine hours Inspection time Packaging time Setups $164.50 $75.60 160.00 120.00 4.20 0.80 0.50 7.90 1.70 0.90 3.00 2.00

Explanation / Answer

1 Profit on sale of each unit of B-13 Costs per Unit Allocation Base Units of Allocation Base Costing Rate Amount Direct Material $      164.50 Material handling Number of parts 160 $                         2.40 $      384.00 (160*2.4) Manufacturing Supervision Hours of Machine time 7.9 $                       14.80 $      116.92 (7.9*14.8) Assembly Number of parts 160 $                         3.30 $      528.00 (160*3.3) Machine Setup Number of setups 3 $                       56.50 $      169.50 (3*56.5) Inspection and Testing Logged Hours 1.7 $                       45.50 $         77.35 (1.7*45.5) Packaging Logged Hours 0.9 $                       19.50 $         17.55 (0.9*19.5) Total Cost per Unit $   1,457.82 Selling Price per Unit $   1,775.00 Profit $      317.18 2 The Target cost for B-13 to maintain market share and profitability @ Market price of B-13 is $1695 Particulars Amount Selling Price per Unit (A) $                                 1,695 Target Profit per Unit (B) $                                     317 Target Cost per Unit (A-B) $                                 1,378

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