Lens Care Incorporated (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 $ 2.50 per part Manufacturing supervision Hours of machine time $ 14.81 per hour Assembly Number of parts $ 3.35 per part Machine setup Each setup $ 56.55 per setup Inspection and testing Logged hours $ 45.55 per hour Packaging Logged hours $ 19.55 per hour LCI currently sells the B-13 model for $2,000 and the F-32 model for $1,500. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32 Direct materials $ 164.55 $ 75.64 Number of parts 161 121 Machine hours 7.95 4.21 Inspection time 1.80 0.90 Packaging time 0.95 0.55 Setups 4 3 The market price for B-13 and F-32 are reduced to $1,920 and $1,375 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)? Multiple Choice 14 45 33 24 52

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

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Lens Care Incorporated (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	$ 2.50	per part
Manufacturing supervision	Hours of machine time	$ 14.81	per hour
Assembly	Number of parts	$ 3.35	per part
Machine setup	Each setup	$ 56.55	per setup
Inspection and testing	Logged hours	$ 45.55	per hour
Packaging	Logged hours	$ 19.55	per hour

LCI currently sells the B-13 model for $2,000 and the F-32 model for $1,500. Manufacturing costs and activity usage for the two products are as follows:

	B-13	F-32
Direct materials	$ 164.55	$ 75.64
Number of parts	161	121
Machine hours	7.95	4.21
Inspection time	1.80	0.90
Packaging time	0.95	0.55
Setups	4	3

The market price for B-13 and F-32 are reduced to $1,920 and $1,375 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

Multiple Choice