Reference no: EM13571342

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:

Activities	Activity Measure	Expected Activity	Estimated Overhead Cost
Machine setups	Number of setups	400	$166,000
Quality control	Number of inspections	1,500	$240,000
Other overhead	Machine-hours	30,000	$720,000

Information (on a per unit basis) related to three popular products at Njombe are as follows:

	Model #19		Model #36		Model #58
Direct material cost	$800		$1,100		$620
Direct labor cost	$1,610		$1,240		$440
Number of setups	2		3		1
Number of inspections	1		3		1
Number of machine-hours	4		8		10

Under the activity-based costing system, what would be the selling price of one unit of Model #36?

	$4,257
	$3,750
	$6,992
	$8,514