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       120   Machine hours   7.90       4.20   Inspection time   1.70       0.80   Packaging time   0.90       0.50   Setups   3       2       If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)?     B-13   F-32 A) $ 80     $ 120   B) $ 1,378     $ 125   C) $ 318     $ 856   D) $ 1,378     $ 856   E) $ 318     $ 422

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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       120  
Machine hours   7.90       4.20  
Inspection time   1.70       0.80  
Packaging time   0.90       0.50  
Setups   3       2  
 

 

If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)?

 

  B-13   F-32
A) $ 80     $ 120  
B) $ 1,378     $ 125  
C) $ 318     $ 856  
D) $ 1,378     $ 856  
E) $ 318     $ 422  
 

 

 
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