The management of Landstrom Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product:
Management plans to produce and sell 6,000 units of the new product annually. The new product would require an investment of $1,036,200 and has a required return on investment of 10%.
Required:
a. Determine the unit product cost for the new product.
b. Determine the markup percentage on absorption cost for the new product.
c. Determine the selling price for the new product using the absorption costing approach.

Question

The management of Landstrom Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product:
  Management plans to produce and sell 6,000 units of the new product annually. The new product would require an investment of $1,036,200 and has a required return on investment of 10%.
Required:
a. Determine the unit product cost for the new product.
b. Determine the markup percentage on absorption cost for the new product.
c. Determine the selling price for the new product using the absorption costing approach.

Quizplus · Accepted Answer

The Answer of The management of Landstrom Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product:
  Management plans to produce and sell 6,000 units of the new product annually. The new product would require an investment of $1,036,200 and has a required return on investment of 10%.
Required:
a. Determine the unit product cost for the new product.
b. Determine the markup percentage on absorption cost for the new product.
c. Determine the selling price for the new product using the absorption costing approach.

The Management of Landstrom Corporation Would Like to Set the Selling