Lens care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are...


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 PoolsAllocation BaseCosting Rate
Materials handling Number of parts$2.40 per part
Manufacturing supervisionHours of machine time$14.80 per hour
AssemblyNumber of parts$3.30 per part
Machine setupEach setup$56.50 per setup
Inspection and testingLogged hours$45.50 per hour
PackagingLogged 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:

Direct materials$164.50$75.60
Number of parts160.00120.00
Machine hours7.904.20
Inspection time1.700.80
Packaging time0.900.50

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

Become a member to unlock this answer!

View this answer

The product cost includes direct material cost, direct and manufacturing overheads

The product cost for model B-13 is calculated as under

  • the direct...

See full answer below.

Learn more about this topic:

The Activity-Based Costing Process


Chapter 5 / Lesson 3

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.

Related to this Question

Explore our homework questions and answers library