The absorption costing approach to cost-plus pricing will result in attaining the company's required rate of return only if forecasted unit sales are realized,holding all other things constant.

Question

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Absorption costing includes all production costs, including fixed overhead costs, in the calculation of unit cost. Cost-plus pricing using absorption costing assumes that a profit margin is added to the full cost of producing a unit, including overhead costs allocated to that unit. Thus, for the company to achieve the required rate of return, forecasted unit sales must be realized to cover all costs and add the desired profit margin.

The Absorption Costing Approach to Cost-Plus Pricing Will Result in Attaining