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 usage 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 profit margin based on manufacturing cost for model B-13 is:_______.
a. $481.68.
b. $314.69.
c. $239.09.
d. $317.18.
e. $338.16.

Answer 1

d. $317.18

Step-by-step explanation:

Calculation for what The profit margin based on manufacturing cost for model B-13 is

PROFIT MARGIN

Model B-13

Sales $1775

Less Manufacturing cost:

Direct material $164.50

Material handling $384

(160*$2.40)

Manufacturing supervision $116.92

(7.90*$14.80)

Assembly

(160*$3.30) $528

Machine setup $169.5

(3*$56.50)

Inspection and testing $77.35

(1.70*$45.50)

Packaging $17.55

(0.90*$19.50)

Profit margin $317.18

Therefore The profit margin based on manufacturing cost for model B-13 is $317.18