Appendix 12A) Lacy Corporation uses the absorption costing approach to cost-plus pricing to set prices for...
Appendix 12A) Lacy Corporation uses the absorption costing approach to cost-plus pricing to set prices for its products. Based on budgeted sales of 86,000 units next year, the unit product cost of a particular product is $81.60. The company's selling, general, and administrative expenses for this product are budgeted to be $1,247,000 in total for the year. The company has invested $360,000 in this product and expects a return on investment of 12%. The markup on absorption cost for this product would be closest to which of the following?
Multiple Choice
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12.0%.
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17.8%.
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18.4%.
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29.8%.
Homework Answers
Cost = $81.60 X 86,000 = $7,017,600
Markup = $1,247,000 + ($360,000 X 12%) = $1,290,200
Markup percentage = Markup / Cost
= $1,290,200 / $7,017,600
= 18.4%
3rd option
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