The following information is available on 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 would be:
A)$240,000
B)$300,000
C)$140,000
D)$200,000

Question

The following information is available on 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 would be:
A)$240,000 
B)$300,000 
C)$140,000 
D)$200,000

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]
= [(15% F1F1F1S1F1F1F10 $400,000) + Selling and administrative expenses] F1F1F1S1F1F1F10 [$50 F1F1F1S1F1F1F10 10,000] = 60%*
= [$60,000 + Selling and administrative expenses] F1F1F1S1F1F1F10 $500,000 = 60%
$60,000 + Selling and administrative expenses = $300,000
Selling and administrative expenses = $240,000
*60% = (Selling price per unit ($80) F1F1F1S1F1F1F10 Unit product cost ($50)) - 1

The Following Information Is Available on Product A: the Company