Njombe Corporation Manufactures a Variety of Products

question 16

Multiple Choice

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 traditional costing system, what would be the selling price of one unit of Model #36?

• A) $2,536
• B) $2,712
• C) $4,080
• D) $5,506

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Definitions:

Truth-In-Lending Act

A federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost.

Truth-In-Lending Act

is a federal law designed to protect consumers in their dealings with lenders and creditors by requiring clear disclosure of key terms of the lending arrangement and all costs.

Loan Between Two Consumers

A financial agreement in which one consumer lends money to another consumer without the involvement of traditional financial institutions.

Extending Credit

The practice of allowing a buyer to purchase goods or services now and pay for them later.