Surent Corporation has the following information available on Product K: $\begin{array}{lr}
\text {Number of units sold each year. }&80,000\
\text {Unit product cost. }&\$25\
\text {Investment in Product K }&\$400,000\
\text {Required return on investment }&20\%\
\end{array}$
The company uses the absorption costing approach to cost-plus pricing described in the text and a 50% markup. Based on these data, the company's total selling and administrative expenses associated with Product K each year are:
A)$80,000
B)$200,000
C)$920,000
D)$800,000

Question

Surent Corporation has the following information available on Product K: $\begin{array}{lr}
\text {Number of units sold each year. }&80,000\
\text {Unit product cost. }&\$25\
\text {Investment in Product K }&\$400,000\
\text {Required return on investment }&20\%\
\end{array}$
 The company uses the absorption costing approach to cost-plus pricing described in the text and a 50% markup. Based on these data, the company's total selling and administrative expenses associated with Product K each year are:
A)$80,000
B)$200,000
C)$920,000
D)$800,000

Quizplus · Accepted Answer

The total selling and administrative expenses associated with Product K each year are $920,000. This is calculated as follows:Total selling and administrative expenses = (Unit product cost + (Unit product cost x Markup percentage)) x Number of units sold each year= ($25 + ($25 x 50%)) x 80,000= $37.50 x 80,000= $920,000

Surent Corporation Has the Following Information Available on Product K