For the current year, Babcock Ltd., forecast sales of 42,000 units and production of 40,000 units.Other budget information for the year included:
The standard costs remained the same as in the previous year.Babcock Ltd.is considering various cost bases.The company management require a 15% return on an investment base of $2,500,000; and, wants this cost built into all cost base options.Required:
a.Compute the cost-plus price per unit using direct costing.
b.Compute the cost-plus price per unit using absorption costing.
c.Compute the cost-plus price per unit using the full product cost.

Question

For the current year, Babcock Ltd., forecast sales of 42,000 units and production of 40,000 units.Other budget information for the year included:
  The standard costs remained the same as in the previous year.Babcock Ltd.is considering various cost bases.The company management require a 15% return on an investment base of $2,500,000; and, wants this cost built into all cost base options.Required:
a.Compute the cost-plus price per unit using direct costing.
b.Compute the cost-plus price per unit using absorption costing.
c.Compute the cost-plus price per unit using the full product cost.

Quizplus · Accepted Answer

The Answer of For the current year, Babcock Ltd., forecast sales of 42,000 units and production of 40,000 units.Other budget information for the year included:
  The standard costs remained the same as in the previous year.Babcock Ltd.is considering various cost bases.The company management require a 15% return on an investment base of $2,500,000; and, wants this cost built into all cost base options.Required:
a.Compute the cost-plus price per unit using direct costing.
b.Compute the cost-plus price per unit using absorption costing.
c.Compute the cost-plus price per unit using the full product cost.

For the Current Year, Babcock Ltd