a) 36% b) 17% c) 14% d) 23% Minden Corporation estimates that the following cost
ID: 2409682 • Letter: A
Question
a) 36%
b) 17%
c) 14%
d) 23%
Minden Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product A: Number of units sold annually Required investment Unit product cost Selling and administrative expenses $109,060 23,000 $430,000 $ 2:2 If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 17% rate of return on investment (ROI), the required markup on absorption cost for Product A would be closest to:Explanation / Answer
Markup percentage on absorption cost =
[(Required ROI × Investment) + Selling and administrative expenses]*100 ÷ (Unit product cost × Unit sales)
=[17%*$4,30,000)+$1,08,960]*100÷ ($22*23,000)
=(73,100+$1,09,960)*100÷ $5,06,000
=$1,83,060*100÷$5,06,000
=36%
Therefore answer is option (a) 36%
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