Lens care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are...
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 used 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 |
The product cost for model B-13 is
a. $1,457.82.
b. $1,293.32.
c. $1,159.34
d. $905.31.
e. $980.91.
Activity-based costing:
The activity-based costing is a technique of allocating overhead cost to the product or service by identifying cost drivers, cost pools and calculating activity rates for each cost pool and amount of activities consumed for each cost pool by the product.
Answer and Explanation: 1
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View this answerThe product cost includes direct material cost, direct and manufacturing overheads
The product cost for model B-13 is calculated as under
- the direct...
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The Activity-Based Costing Process
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Chapter 5 / Lesson 3
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Activity-based costing is used to track costs for each aspect of production. Learn the activity-based costing process, including how to use activity cost pools, find activity rates, assign overhead, and report information on a manufacturing overhead budget.
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