Cosgrove Company manufactures two products, Product K-7 and Product L-15. Produc
ID: 2500027 • 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 $1,140,940 in manufacturing overhead costs and produce 10,500 units of Product L-15 and 42,000 units of Product K- 7 during the current year.
Compute the predetermined overhead rate under the current method of allocation and. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" 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.)
$
$
Unit costs for materials and labor are:Explanation / Answer
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 $ Predetermined Overhead Rate for Product K-7 No of units to be produced 42000 Labour Hour per unit 2 Total No. of Labour Hours 84000 Allocation of Overheads 829774.5455 (Total Overheads $ 1,170,940/Total No. of labour hours 115,500 X No. of hours for K-7 84,000) Overhead Rate Per Unit 19.76 $ per unit Product L-15 No of units to be produced 10500 Labour Hour per unit 3 Total No. of Labour Hours 31500 Allocation of Overheads 311165.4545 (Total Overheads $ 1,170,940/Total No. of labour hours 115,500 X No. of hours for K-7 31,500) Overhead Rate Per Unit 29.63 $ per unit 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 $ 17 + 8 + 19.76 = $ 44.76 Product L-15 $ 34 + 14 + 29.63 = $ 77.63 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 $ 652,210 1,510 2,260 3,770 Purchase orders issued 51,975 531 162 693 Machine-hours required 112,140 7,900 10,790 18,690 Maintenance requests issued 324,615 737 878 1,615 $ 1,140,940 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.) (Please note that unless otherwise specified, all values in $) Product K-7 Product L-15 Direct materials 17.00 34.00 As given above Direct labour 8.00 14.00 As given above Manufacturing overhead 11.82 61.37 Total Manufacturing Overheads/No. of units Total unit product cost 36.82 109.37 Machine Setup Costs Allocated Purchase Orders Issued Machine Hours Required Product K-7 261230 Product K-7 39825.00 Product K-7 47400.00 Product L-15 390980 Product L-15 12150.00 Product L-15 64740.00 No.of units No.of units No.of units Product K-7 42000 Product K-7 42000 Product K-7 42000 Product L-15 10500 Product L-15 10500 Product L-15 10500 Maintenance Requests Issued Total Manufacturing Overheads Product K-7 148137 Product K-7 496592.00 Product L-15 176478 Product L-15 644348.00 No.of units No.of units Product K-7 42000 Product K-7 42000 Product L-15 10500 Product L-15 10500