Cosgrove Company manufactures two products, Product K-7 and Product L-15. Produc
ID: 2454682 • Letter: C
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 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 $1,018,066 in manufacturing overhead costs and produce 10,800 units of Product L-15 and 54,000 units of Product K- 7 during the current year.
Compute the predetermined overhead rate under the current method of allocation and. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.)
.
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 "$" sign in your response.)
The company is considering the use of activity-based costing as an alternative to its traditional costing method for manufacturing overhead. Data relating to the company's activity cost pools for the current year are given below:
Total Activity
Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
$
$
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 $1,018,066 in manufacturing overhead costs and produce 10,800 units of Product L-15 and 54,000 units of Product K- 7 during the current year.
Explanation / Answer
Total direct labor hour
a-1 ) Predetermined overhead rat = total manufacturing overhead/ total hours
= $1,018,066/ 140,400
= $7.25
a-2) Unit product cost
B)
Unit product cost
K-7 2*54,000 $108,000 L-15 3*10,800 $32,400 total hours 140,400 hours