The following information is available on Browning Inc.'s 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 are:
A) $720,000
B) $480,000
C) $640,000
D) $400,000

Question

The following information is available on Browning Inc.'s 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 are:
A) $720,000 
B) $480,000 
C) $640,000 
D) $400,000

Quizplus · Accepted Answer

The total selling and administrative expenses can be calculated as follows:
Total manufacturing cost per unit = Direct materials + Direct labor + Manufacturing overhead
= $120 + $80 + $56
= $256
Total manufacturing cost for 10,000 units = $256 x 10,000 = $2,560,000
Total selling and administrative expenses (as a percentage of total manufacturing cost) = (25% x $2,560,000) = $640,000.

The Following Information Is Available on Browning Inc