Question
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 $1,139,421 in manufacturing overhead costs and produce 15,000 units of Product L-15 and 75,000 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 | $ | 24 |
Direct labor | $ | 11 | $ | 13 |
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 | $ | 643,440 | 1,590 | 2,240 | 3,830 |
Purchase orders issued | 58,266 | 555 | 192 | 747 | |
Machine-hours required | 221,640 | 7,760 | 10,710 | 18,470 | |
Maintenance requests issued | 216,075 | 736 | 939 | 1,675 | |
$ | 1,139,421 | ||||
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 | $ | $ | ||
Could you please add the steps on how you calculated the answers to each part it would be of great assistance for me in my studies. Thanks in advance!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started