The following information is available on Browning Inc.'s Product A: 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)$720,000
B)$480,000
C)$640,000
D)$400,000

Question

The following information is available on Browning Inc.'s Product A:  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)$720,000 
B)$480,000 
C)$640,000 
D)$400,000

Quizplus · Accepted Answer

Markup percentage on absorption cost
= [(Required ROI F1F1F1S1F1F1F10 Investment) + Selling and administrative expenses]
F1F1F1S1F1F1F10 [Unit product cost F1F1F1S1F1F1F10 Units sales]
= [(16% F1F1F1S1F1F1F10 $500,000) + Selling and administrative expenses] F1F1F1S1F1F1F10 [$60 F1F1F1S1F1F1F10 20,000] = 60%*
= [$80,000 + Selling and administrative expenses] F1F1F1S1F1F1F10 $1,200,000 = 60%
$80,000 + Selling and administrative expenses = $720,000
Selling and administrative expenses = $640,000
* (Selling price per unit ($96) F1F1F1S1F1F1F10 Unit product cost ($60)) - 1 = 60%

The Following Information Is Available on Browning Inc