Cosgrove Company manufactures two products, Product K-7 and Product L-15. Product L-15 is of fairly...
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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 2.0 hours of direct labor time per unit to manufacture compared to 1.0 hour of direct labor time for Product K-7. Overhead currently is applied to the products on the basis of direct labor hours. The company estimated it would incur $510,000 in manufacturing overhead costs and produce 10,000 units of Product L-15 and 40,000 units of Product K- 7 during the current year. Unit costs for materials and labor are:
|
|
| Product K-7 | Product L-15 |
|
| Direct material | $11 | $24 |
|
| Direct labor | 6 | 12 |
Compute total cost per unit for Product K-7 using the current predetermined overhead rate based on direct labor hours.
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