Managerial Accounting: Chapter 7-Activity based costing. A tool to aid decision making. Required:1. Compute the predetermined overhead rate under the current method allocation and determine the cost to manufacture one unit of each product for the current year. 2. Using the data below and an activity based costing approach, determine the total cost to manufacture one unit of each product for the current year. The companys overhead costs can be traced to four major activities. These activities and the amount of overhead traceable to each for the current year are given below.

Secord 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 two hours of direct labour time per unit to manufacture compared to one hour of direct labour time for Product K-7. Product L-15 is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour 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 labour are: Product K-7 Product L-15 Direct Material $11 $24 Direct labour 6 12 Required: 1. Compute the predetermined overhead rate under the current method of allocation, and determine the cost to manufacture one unit of each product for the current year. 2. Using the data below and an activity costing approach, determine the total cost to manufacture one unit of each product for the current year. The company's overhead costs can be traced to four major activities. These activities and the amount of overhead traceable to each for the current year are given below: Traceable Total Product Product Activity Costs Activity K-7 L-15 Machine setups required $204,000 2,400 800 1,600 Purchase orders issued 43,500 600 500 100 Machine-hours required 105,000 17,500 7,000 10,500 Maintenance requests issued 157,500 1,500 650 850 $510,000