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 F-32 is:
Definitions:
Degrees of Competition
The extent to which market competition exists, characterized by the number of firms, product differentiation, and barriers to entry.
Pure Monopoly
A market structure where a single seller controls all of a product's supply and can set prices without competition.
Pure Competition
A market structure characterized by a large number of small firms, a homogeneous product, and easy entry and exit, leading to perfect competitive markets.
Differentiated Oligopoly
A market structure where a few firms dominate, but differentiate their products through branding, quality, or other means to compete.
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