(Appendix 12A) Marvel Company estimates that the following costs and activity would be associated with the...
(Appendix 12A) Marvel Company estimates that the following costs
and activity would be associated with the manufacture and sale of
one unit of product Y:
| Number of Units Sold Annually | 20,000 |
| Required Investment | $400,000 |
| Unit Product Cost | $25 |
| Selling, General, and Administrative Expenses | $130,000 |
If the company uses the absorption costing approach to cost-plus
pricing and desires a 15% rate of return on investment (ROI), what
would be the required markup on absorption cost for product Y?
Multiple Choice
-
12%.
-
15%.
-
26%.
-
38%.
Homework Answers
Profit expected = 400,000*15% = 60,000
Gross margin expected = 60,000 + 130,000 = 190,000
Gross margin expected per unit = 190,000/20,000 = 9.5
Markup = 9.5/25
= 38%
Option D is the answer
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