50.1K

Verified Solution

Link Copied!

Cosgrove Company manufactures two products, Product K-7 and Product L-15. Product L-15 is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product K-7. Product L-15 is the more complex of the two products, requiring 3 hours of direct labor time per unit to manufacture compared to 2 hour of direct labor time for Product K-7. Product L-15 is produced on an automated production line. Overhead currently is applied to the products on the basis of direct labor-hours. The company estimated it would incur $1,021,448 in manufacturing overhead costs and produce 19,300 units of Product L-15 and 96,500 units of Product K- 7 during the current year.

Unit costs for materials and labor are:

	Product K-7		Product L-15
Direct material	$	21	$	29
Direct labor	$	8	$	18

Required:

a-1	Compute the predetermined overhead rate under the current method. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)

.

Predetermined overhead rate

$

a-2	Determine the unit product cost of each product for the current year. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Unit Product Cost
Product K-7	$
Product L-15	$

b.	The company is considering the use of activity-based costing as an alternative to its traditional costing method for manufacturing overhead. Data relating to the company's activity cost pools for the current year are given below:

	Total Cost		Product K-7	Product L-15	Total
Machine setups required	$	511,920	1,190	1,970	3,160
Purchase orders issued		54,964	559	169	728
Machine-hours required		227,160	7,730	11,200	18,930
Maintenance requests issued		227,404	740	896	1,636
	$	1,021,448

Using the data above, determine the unit product cost of each product for the current year. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)

	Product K-7	Product L-15
Direct materials	$	$
Direct labour
Manufacturing overhead
Total unit product cost	$	$

Answer & Explanation Solved by verified expert

See Answer