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Question 1 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
Question 1 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 2.0 hours of direct labor time per unit to manufacture compared to 1.0 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 labor-hours. 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 $11 S6 Product L-15 $24 $12 Required: (a) Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. (8 marks)
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