# Cosgrove Company manufactures two products

01 / 10 / 2021 Projects

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## Cosgrove Company manufactures two products

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 \$925,944 in manufacturing overhead costs and produce 11,400 units of Product L-15 and 45,600 units of Product K- 7 during the current year.Unit costs for materials and labor are:Product K-7Product L-15 Direct material\$15 \$25 Direct labor\$13 \$13 Required:a-1Compute 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.) Unit Product Cost Product K-7\$ Product L-15\$ 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 PoolsTotal CostProduct K-7Product L-15Total Machine setups required\$392,080 1,170 2,210 3,380 Purchase orders issued55,706 552 140 692 Machine-hours required171,810 7,930 11,160 19,090 Maintenance requests issued306,348 653 910 1,563 \$925,944 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.)Product K-7Product L-15 Direct materials \$ \$ Direct labour Manufacturing overhead Total unit product cost \$ \$

International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

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