Quamma Corporation makes a product that has the following costs:
The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 23,000 units per year.
The company has invested $280,000 in this product and expects a return on investment of 8%.
Required:
a. Compute the markup on absorption cost.
b. Compute the selling price of the product using the absorption costing approach.

Question

Quamma Corporation makes a product that has the following costs:
  The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 23,000 units per year.
The company has invested $280,000 in this product and expects a return on investment of 8%.
Required:
a. Compute the markup on absorption cost.
b. Compute the selling price of the product using the absorption costing approach.

Quizplus · Accepted Answer

The Answer of Quamma Corporation makes a product that has the following costs:
  The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 23,000 units per year.
The company has invested $280,000 in this product and expects a return on investment of 8%.
Required:
a. Compute the markup on absorption cost.
b. Compute the selling price of the product using the absorption costing approach.

Quamma Corporation Makes a Product That Has the Following Costs