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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

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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 pinducts, reyuinime 2.0 houn of direct labor time per unit to manufacture compared to 1.0 bour of direct labor time for Product K-7. Product L.15 is produced on an automated production tine. Overheat currently is applied to the products on the basis of direct labor-hours. The company estimated it would incur $510,000 in manulacturing overhead conts and pridase 10,000 unats of Produci L-15 and 40.000 units of Product K- 7 during the currem year. Unit costs for materials and labor are: Problem (I) Traditional Costing vs. ABC Methods Part A) Using Traditional Costing System Required: a. Compute the predetermined overhead rate under the current method and determine the anit product cost of each product for the current year. 1. Calculate Predetermined Overhead Rate = 2. Determine unit product cost under the traditional costine svstem. 3. Calculate selling price of Product K-7 and Product L-15 assuming Cosgrovo wants to have 270% markep on cost. Part B Using Activity Based Costing (ABC) System The company is considering the use of activity-based costing as an altemative to its traditional conting method for manufacturing overbead. Data relating to the company's activity cost pools for the current year are given below: Using the data above, determine the unit product cost of cach product for the current year 1. Calculate activity based rate using ABC systems 1. Calculate activity-based rate using ABC systems Activity Cost Pool Estimated Total ABC Ratef 2. Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system. ABC Overhead Cost ner Unit of Product K-7 and Product L-15 using ABC Method assuming Cosgrove wants to ha of Product K-7 and Product L-15 using ABC Method assuming Cosgrove wants to ha Part C) Why product costs for Product K7 and Product L-15 are different between traditional costing and ABC costing? What influence might the activity-based costing data have on management's opinions regarding the profitability of Product k7 and Product Lo ie9

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