The Gluten Free Company, which manufactures gluten free snack foods, is ready to introduce a new line of breakfast bars. The following data is available: $\begin{array} { | l | r | }
\hline \text { Variable manufacturing cost } & \$ 240 \
\hline \text { Variable selling and administrative cost } & 20 \
\hline \text { Applied fixed manufacturing cost } & 80 \
\hline \text { Allocated fixed selling and administrative cost } & 65 \
\hline
\end{array}$ What price will the company charge if the firm uses cost-plus pricing based on absorption manufacturing cost and a markup percentage of 140%?

Question

The Gluten Free Company, which manufactures gluten free snack foods, is ready to introduce a new line of breakfast bars. The following data is available: $\begin{array} { | l | r | } 
\hline \text { Variable manufacturing cost } & \$ 240 \
\hline \text { Variable selling and administrative cost } & 20 \
\hline \text { Applied fixed manufacturing cost } & 80 \
\hline \text { Allocated fixed selling and administrative cost } & 65 \
\hline
\end{array}$ What price will the company charge if the firm uses cost-plus pricing based on absorption manufacturing cost and a markup percentage of 140%?

Quizplus · Accepted Answer

The absorption manufacturing cost is the sum of variable manufacturing cost and applied fixed manufacturing cost: $240 + $80 = $320. The cost-plus price is calculated by adding a 140% markup to this cost: $320 + (1.4 * $320) = $768.

The Gluten Free Company, Which Manufactures Gluten Free Snack Foods