Jornd 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 $2\mathrm{.}0$ hours of direct labor time per unit to manufacture compared to $1\mathrm{.}0$ 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 laborhours. The company estimated it would incur $$510,000$ in manufacturing overhead costs and produce $10,000$ units of Product L$-15$ and $40,000$ units of Product K$-7$ during the current year.

Unit costs for materials and labor are:

Product K$-7$ Product L$-15$

Direct Material $$11$ $$24$

Direct Labor $,$$$6$

Required:

a$.$ Compute the predetermined overhead rate under the current method and 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:

$\backslash$table$[[,,$Expected Activity$],[$Activity Cost Pool,$\backslash$table$[[$Estimated$],[$Overhead$]],\backslash$table$[[$Product$]],$Product,Total,$],[$Machine Set$-$ups Req.,$$204,000,800,1,600,2,400,],[$Purchase Orders Issued,$$43,500,500,100,600,],[$Machine Hours Req.,$$105,000,7,000,10,500,17,500,],[$Maintenance Requests Issued,$$157,500,650,850,1,500,]]$

Using the data above, determine the unit product cost of each product for the current year.

C$.$ What item of overhead cost to make product L$-15$ so costly to produce according to the activity based costing system? What influence might the activity based casting data have on management's options regarding the profitability of product L$-15?$