Question
Moruzzi Company manufactures a variety of products. In the past, Moruzzi has been using a traditional costing system in which the predetermined overhead rate was
Moruzzi Company manufactures a variety of products. In the past, Moruzzi 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, Moruzzi 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 PoolEstimated ActivityEstimated Overhead CostMachine Setups400 Number of Setups$150,000Quality Control1,500 Number of Inspections$180,000Other Overhead30,000 Machine Hours$480,000
Information (on a per unit basis) related to three popular products at Moruzzi are as follows:
Model #20Model #46Model #48Direct material cost$400$540$310Direct labor cost$810$600$220Number of setups231Number of inspections131Number of machine hours4810
Under the traditional system, what would be the selling price of one unit of Model #46?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started