Njombe Corporation Manufactures A Variety Of Products.

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 using three activity cost pools. 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: Activity Cost PoolActivity MeasureEstimated ActivityEstimated Overhead CostMachine Setups. . . . . . . . . . . Number of setups400$150,000Quality Control. . . . . . . . . . . . Number of inspections1,500$180,000Other Overhead. . . . . . . . . . . Machine hours30,000$480,000Information (on a per unit basis) related to three popular products at Njombe are as follows: Model #19Model #36Direct material cost. . . . . . . . . . . . . . . . . . . . . . . $400$540Direct labor cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . $810$600Number of setups. . . . . . . . . . . . . . . . . . . . . . . . . 23Number of inspections. . . . . . . . . . . . . . . . . . 13Number of machine hours. . . . . . . . . . . . 48Required: What would be the selling price of one unit of each Model under the traditional system?What would be the selling price of one unit of each Model under the activity-based costing system? Explain the change in price.

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