Kirby,Inc. ,manufactures a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text.The pricing calculations are based on budgeted production and sales of 19,000 units per year. The company has invested $580,000 in this product and expects a return on investment of 14%.
The selling price based on the absorption costing approach would be closest to:
A)$74.30
B)$56.11
C)$96.50
D)$78.57

Question

Kirby,Inc. ,manufactures a product with the following costs:  The company uses the absorption costing approach to cost-plus pricing described in the text.The pricing calculations are based on budgeted production and sales of 19,000 units per year. The company has invested $580,000 in this product and expects a return on investment of 14%.
The selling price based on the absorption costing approach would be closest to:
A)$74.30 
B)$56.11 
C)$96.50 
D)$78.57

Quizplus · Accepted Answer

Unit Product Cost:
 11eaaee8_66d8_52b8_933a_4d8ada148274_TB5186_00 *$17.30 = $328,700 F1F1F1S1F1F1F10 19,000 units
Markup percentage on absorption cost
= [(Required ROI F1F1F1S1F1F1F10 Investment) + Selling and administrative expenses]
F1F1F1S1F1F1F10 [Unit product cost F1F1F1S1F1F1F10 Units sales]
= [(14% F1F1F1S1F1F1F10 $580,000) + ($3.70 F1F1F1S1F1F1F10 19,000 + $191,900)] F1F1F1S1F1F1F10 ($60.50 F1F1F1S1F1F1F10 19,000)
= [$81,200 + $262,200] F1F1F1S1F1F1F10 $1,149,500 = 29.87%
Selling price = $60.50 + (29.87% F1F1F1S1F1F1F10 $60.50) = $78.57

Kirby,Inc ,Manufactures a Product with the Following Costs: the Company