Njombe Corporation manufactures a variety of products. In the past, Njombe has been using a traditional costing system in which the predetermined overhead rate was 150% of direct labor cost. Selling prices had been set by multiplying total product cost by 200%. Sensing that this system was distorting costs and selling prices, Njombe has decided to switch to an activity-based costing system for manufacturing overhead costs that uses the three activity cost pools listed below. Selling prices are still to be set at 200% of unit product cost under the new system. Information on these cost pools for next year are as follows: Information (on a per unit basis) related to three popular products at Njombe are as follows:
Under the activity-based costing system, what would be the selling price of one unit of Model #36?

Question

Njombe Corporation manufactures a variety of products. In the past, Njombe has been using a traditional costing system in which the predetermined overhead rate was 150% of direct labor cost. Selling prices had been set by multiplying total product cost by 200%. Sensing that this system was distorting costs and selling prices, Njombe has decided to switch to an activity-based costing system for manufacturing overhead costs that uses the three activity cost pools listed below. Selling prices are still to be set at 200% of unit product cost under the new system. Information on these cost pools for next year are as follows:  Information (on a per unit basis) related to three popular products at Njombe are as follows:
 Under the activity-based costing system, what would be the selling price of one unit of Model #36?

Quizplus · Accepted Answer

The activity rates are computed as follows:
 11eacbfc_c8a1_90f0_8ffe_bd9ce6fe7d62_TB7552_00 The overhead cost charged to Model #36 is:
 11eacbfc_c8a1_90f1_8ffe_6f03ff0f5a98_TB7552_00 11eacbfc_c8a1_b802_8ffe_4761a88bfdc0_TB7552_00

Njombe Corporation Manufactures a Variety of Products