Business, 14.05.2021 01:00, alexisscalera7
Currington Company wants to use absorption cost-plus pricing to set the selling price on a newly remodeled product. The company plans to invest $168,000 in operating assets to produce and sell 12,000 units. Its required return on investment (ROI) in its operating assets is 16%. The accounting department has provided cost estimates for the new product as follows:
Per Unit Total
Direct materials $4.9
Direct labor $3.9
Variable manufacturing overhead $1.9
Fixed manufacturing overhead $76,800
Variable selling and administrative expenses $1.9
Fixed selling and administrative expenses $32,400
Required:
a. What is the unit product cost for the remodeled product?
b. What is the markup percentage on absorption cost for the remodeled product?
c. What selling price would the company establish for its remolded product using a markup percentage on absorption cost?
d. Suppose the company actually produced and sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement c. What ROI did the company actually earn at this lower sales volume?.
Answers: 2
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