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 $885,195 in manufacturing overhead costs and produce 16,400 units of Product L-15 and 65,600 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 $ 25 Direct labor $ 7 $ 13

Required:

a-1	Compute the predetermined overhead rate under the current method of allocation and.

a-2

Determine the unit product cost of each product for the current year

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 Activity

Activity Cost Pools	Total Cost		Product K-7	Product L-15	Total
Machine setups required	$	316,840	1,500	2,060	3,560
Purchase orders issued		53,397	502	196	698
Machine-hours required		285,300	7,900	11,120	19,020
Maintenance requests issued		229,658	674	899	1,573
	$	885,195

Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.