Cosgrove Company manufactures two products, Product K-7 and Product L-15. Produc
ID: 2557582 • 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 $1,139,421 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 Produc K-7 L-15 $17 $24 $11 13 Direct material Direct labor Required a-1 Compute the predetermined overhead rate under the current method of allocation and. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "$" sign in your response.) Predetermined overhead rate $[-] a-2Determine the unit product cost of each product for the current year. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)Explanation / Answer
Answers
Product K-7
Product L-15
Direct labor hours per unit
2
3
Total Units
75000
15000
Total DLHs
150000
45000
Total manufacturing overhead cost
$ 11,39,421.00
Total DLHs [150000+45000]
195000
Predetermined rate per DLH
$ 5.84 per DLHs
Product K-7
Product L-15
Direct labor hours per unit
$ 2.00
$ 3.00
Overhead allocated at $5.84 per DLH
$ 11.68
$ 17.52
Direct material
$ 17.00
$ 24.00
Direct labor
$ 11.00
$ 13.00
Total Unit Cost
$ 39.68
$ 54.52
Cost pool
Overhead cost (A)
Total cost driver (B)
Activity Rates per cost driver (A/B)
Product K-7 Cost drivers
Product K-7 Allocated Cost
Product L-15 Cost drivers
Product L-15 Allocated Cost
machine setup required
$643440
3830
$168
1590
$267120
2240
$376320
Purchase order
$58266
747
$78
555
$43290
192
$14976
machine hours
$221640
18470
$12
7760
$93120
10710
$128520
maintenance request
$216075
1675
$129
736
$94944
939
$121131
TOTAL
$1139421
$498474
$640947
Units
75000
15000
Overhead cost per unit
$ 6.65
$ 42.73
Product K-7
Product L-15
Direct material
$ 17.00
$ 24.00
Direct labor
$ 11.00
$ 13.00
Manufacturing Overhead
$ 6.65
$ 42.73
Total Unit Cost
$ 34.65
$ 79.73
Product K-7
Product L-15
Direct labor hours per unit
2
3
Total Units
75000
15000
Total DLHs
150000
45000