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:
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: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.

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:
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: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.

Quizplus · Accepted Answer

Using activity-based costing, the product cost for model B-13 can be calculated as follows:
Activity cost for Model B-13 = (Activity rate x Activity usage)
Activity 1 cost = ($10 x 70) = $700
Activity 2 cost = ($12 x 5) = $60
Activity 3 cost = ($15 x 2) = $30
Activity 4 cost = ($50 x 1) = $50
Total activity cost for B-13 = $840
Manufacturing cost of B-13 = Total activity cost for B-13 + Direct materials cost + Direct labor cost
= $840 + $400 + $217.82
= $1,457.82
Therefore, the product cost for model B-13 is $1,457.82. Option A is the correct answer.