The following information is available on Bruder Inc.'s Product A: $\begin{array}{ll}
\text {Number of units sold each year. }&10,000 \
\text {Selling price per unit }&\$80 \
\text { Unit product cost.}&\$50 \
\text {Investment in Product A. }& \$400,000\
\text {Required return on investment. }&15\% \
\end{array}$
The company uses the absorption costing approach to cost-plus pricing described in the text. Based on these data, the total selling and administrative expenses each year are:
A)$240,000
B)$300,000
C)$140,000
D)$200,000

Question

The following information is available on Bruder Inc.'s Product A: $\begin{array}{ll}
\text {Number of units sold each year. }&10,000 \
\text {Selling price per unit }&\$80 \
\text { Unit product cost.}&\$50 \
\text {Investment in Product A. }& \$400,000\
\text {Required return on investment. }&15\% \
\end{array}$
 The company uses the absorption costing approach to cost-plus pricing described in the text. Based on these data, the total selling and administrative expenses each year are:
A)$240,000
B)$300,000
C)$140,000
D)$200,000

Quizplus · Accepted Answer

The required return on investment is 15% of $400,000, which is $60,000. The total profit needed is $300,000 (10,000 units x ($80 - $50)). Therefore, the total selling and administrative expenses are $300,000 - $60,000 = $240,000.

The Following Information Is Available on Bruder Inc The Company Uses the Absorption Costing Approach to Cost-Plus Pricing