Question
Bomber Corporation manufactures a variety of products. In the past, Bomber has been using a traditional costing system in which the predetermined overhead rate was
Bomber Corporation manufactures a variety of products. In the past, Bomber 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, Bomber 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:
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