The following costs relate to Tower Company: Variable manufacturing cost, $30; variable selling and administrative cost, $8; applied fixed manufacturing overhead, $15; and allocated fixed selling and administrative cost, $4.
- If Tower uses absorption manufacturing-cost pricing formulas, the company's markup percentage would be computed on the basis of:
A) $30.
B) $38.
C) $45.
D) $57.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

Absorption costing includes all manufacturing costs, both variable and fixed, in the cost of a product. Therefore, the base for the markup percentage includes the variable manufacturing cost ($30) and the applied fixed manufacturing overhead ($15), totaling $45.

The Following Costs Relate to Tower Company: Variable Manufacturing Cost