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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

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 $1,140,940 in manufacturing overhead costs and produce 10,500 units of Product L-15 and 42,000 units of Product K- 7 during the current year.

Unit costs for materials and labor are:
Product K-7 Product L-15
Direct material $ 17 $ 34
Direct labor $ 8 $ 14
Required:
a-1

Compute the predetermined overhead rate under the current method of allocation and. (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 Activity

Activity Cost Pools Total Cost Product K-7 Product L-15 Total
Machine setups required $ 652,210 1,510 2,260 3,770
Purchase orders issued 51,975 531 162 693
Machine-hours required 112,140 7,900 10,790 18,690
Maintenance requests issued 324,615 737 878 1,615
$ 1,140,940

Using the data above and an activity-based costing approach, 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

$

$

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