Diedrich Corporation makes 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 67,000 units per year.The company has invested $420,000 in this product and expects a return on investment of 12%.Direct labor is a variable cost in this company.The markup on absorption cost is closest to:
A) 12.0%
B) 51.0%
C) 49.6%
D) 126.7%

Question

Diedrich Corporation makes 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 67,000 units per year.The company has invested $420,000 in this product and expects a return on investment of 12%.Direct labor is a variable cost in this company.The markup on absorption cost is closest to:
A) 12.0% 
B) 51.0% 
C) 49.6% 
D) 126.7%

Quizplus · Accepted Answer

The Answer of Diedrich Corporation makes 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 67,000 units per year.The company has invested $420,000 in this product and expects a return on investment of 12%.Direct labor is a variable cost in this company.The markup on absorption cost is closest to:
A) 12.0% 
B) 51.0% 
C) 49.6% 
D) 126.7%

Diedrich Corporation Makes a Product with the Following Costs