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 $1,072,715 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 | $ | 18 | $ | 30 |
Direct labor | $ | 11 | $ | 15 |
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 | $ | 531,570 | 1,370 | 2,400 | 3,770 |
Purchase orders issued | 53,703 | 508 | 155 | 663 | |
Machine-hours required | 301,280 | 7,960 | 10,870 | 18,830 | |
Maintenance requests issued | 186,162 | 711 | 922 | 1,633 | |
$ | 1,072,715 | ||||
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 | $ | $ | ||
If you could show work so i can understand this, that would be great! Thank you so much in advance!
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