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:
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.

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:
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.

Quizplus · Accepted Answer

To calculate the profit margin based on manufacturing cost for model B-13, we need to add up the manufacturing cost pools and then divide it by the total number of units produced.

The total manufacturing cost pools for model B-13 are:

- Material cost pool: $1,600,000 
- Setup cost pool: $192,000 
- Machine maintenance cost pool: $252,000 
- Quality control cost pool: $60,000 
- Direct labor cost pool: $480,000

Total manufacturing cost for model B-13 = $2,584,000

The total number of units produced for model B-13 is 8,000.

Manufacturing cost per unit for model B-13 = Total manufacturing cost / Total units produced

= $2,584,000 / 8,000

= $323.

Therefore, the profit margin based on manufacturing cost for model B-13 is:

Profit margin = Selling price - Manufacturing cost per unit
= $640 - $323 
= $317

Hence the answer is D) $317.18.