Marvel Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product Y: If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 15% rate of return on investment (ROI), the required markup on absorption cost for product Y would be:

Question

Marvel Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product Y:  If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 15% rate of return on investment (ROI), the required markup on absorption cost for product Y would be:

Quizplus · Accepted Answer

Markup percentage on absorption cost = [(Required ROI × Investment) + Selling and administrative expenses] ÷ (Unit product cost × Unit sales)
= [(15% × $400,000) + $130,000] ÷ ($25 × 20,000)
= [($60,000) + $130,000] ÷ ($500,000)
= $190,000 ÷ $500,000 = 38%

Marvel Corporation Estimates That the Following Costs and Activity Would