Question

43.) 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	$	2.90	per part
Manufacturing supervision	Hours of machine time	$	14.85	per hour
Assembly	Number of parts	$	3.55	per part
Machine setup	Each setup	$	56.75	per setup
Inspection and testing	Logged hours	$	45.75	per hour
Packaging	Logged hours	$	19.75	per hour

LCI currently sells the B-13 model for $2,900 and the F-32 model for $2,620. Manufacturing costs and activity usage for the two products are as follows:

	B-13				F-32
Direct materials	$	164.75			$	75.80
Number of parts		165				125
Machine hours		8.15				4.25
Inspection time		2.20				1.30
Packaging time		1.15				0.75
Setups		6				5

The product cost for model B-13 is:

Multiple Choice

• $1,813.89.

• $1,649.39.

• $1,515.41.

• $1,261.38.

• $1,336.98.

44.) 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	$	3.60	per part
Manufacturing supervision	Hours of machine time	$	14.92	per hour
Assembly	Number of parts	$	3.90	per part
Machine setup	Each setup	$	57.10	per setup
Inspection and testing	Logged hours	$	46.10	per hour
Packaging	Logged hours	$	20.10	per hour

LCI currently sells the B-13 model for $4,475 and the F-32 model for $4,580. Manufacturing costs and activity usage for the two products are as follows:

	B-13				F-32
Direct materials	$	165.10			$	76.08
Number of parts		172				132
Machine hours		8.50				4.32
Inspection time		2.90				2.00
Packaging time		1.50				1.10
Setups		5				4

If the market price for B-13 and F-32 are reduced to $4,395 and $4,455 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)	$	654.00			$	613.00
B)	$	1,952.00			$	618.00
C)	$	892.00			$	1,349.00
D)	$	1,952.00			$	1,349.00
E)	$	892.00			$	915.00

Multiple Choice

• Option A

• Option B

• Option C

• Option D

• Option E

45.) Bryan Inc. produces a specialty top-quality juice machine. The product, the JM50, requires four processes to be completed. Specifically, these processes are exterior construction, pulp filter insertion, painting, and packaging. Each process is performed at separate workstations with different completion rates:

Exterior construction can manufacture 108,000 juicer exteriors per day.
Pulp filter insertion can install 27,000 filters every 6 hours.
Painting can decorate 3,040 juicers every half hour.
Packaging can package 5,040 juicers per hour.

The plant operates 24/7, 24 hours a day every day of the week.

How many JM50 machines can Bryan Inc. manufacture per month (assume an average 30-day month)?

Multiple Choice

• 4,560,000 juicers.

• 3,840,000 juicers.

• 3,240,000 juicers.

• 3,440,000 juicers.

Answer 1

43) Calculation of Product cost for model B-13 using activity costing (Amounts in $)

Direct materials	164.75
Materials handling ($2.90*165 parts)	478.50
Manufacturing supervision ($14.85*8.15 Machine hrs)	121.03
Assembly ($3.55*165 parts)	585.75
Machine setup ($56.75*6 setups)	340.50
Inspection and testing (2.20 hrs*$45.75)	100.65
Packaging (1.15 hrs*$19.75)	22.71
Total Product Cost	1,813.89

Therefore the product cost for model B-13 is $1,813.89. Hence the correct option is A) $1,813.89.

44) Firstly we need to calculate current profit which is shown as follows:- (Amounts in $)

	B-13	F-32
Current Selling price (A)	4,475	4,580
Product Cost:
Direct materials	165	76
Materials handling	619 (172*$3.60)	475 (132*$3.60)
Manufacturing supervision	127 (8.50*$14.92)	65 (4.32*$14.92)
Assembly	671 (172*$3.90)	515 (132*$3.90)
Machine setup	286 (5*$57.10)	228 (4*$57.10)
Inspection and testing	134 (2.90*$46.10)	92 (2.00*$46.10)
Packaging	30 (1.50*$20.10)	22 (1.10*$20.10)
Total Product Cost (B)	2,032	1,473
Current Profit (A-B)	2,443	3,107

Calculation of Target Cost (Amounts in $)

	B-13	F-32
New Selling price	4,395	4,455
Required Profit	(2,443)	(3,107)
Target Cost	1,952	1,348 (approx 1,349)

Therefore the correct option is D) $1,952 for B-13 and $1,349 for F-32.

45) Calculation of maximum production in each process for the month

Exterior Construction (108,000 juicers*30 days)	3,240,000
Pulp Filter insertion [(27,000/6 hrs)*24 hrs*30 days]	3,240,000
Painting [(3,040 juicers/0.50 hrs)*24 hrs*30 days]	4,377,600
Packaging (5,040 juicers per hr*24 hrs*30 days)	3,628,800

The minimum juicers that can be produced in every process are 3,240,000 juicers.

Therefore Bryan Inc. can manufacture 3,240,000 juicers per month. Hence the correct option is C) 3,240,000 juicers.