25. The management of Matsuura Corporation would like to set the selling price o

Question

25.

The management of Matsuura Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product:

Per Unit

Per Year

  Direct materials

$48.80

  Direct labor

$15.80

  Variable manufacturing overhead

$7.80

  Fixed annual manufacturing overhead

$69,440

  Variable selling and administrative expenses

$3.80

  Fixed annual selling and administrative expenses

$19,040

Management plans to produce and sell 2,800 units of the new product annually. The new product would require a return on investment of $27,200 (the required ROI x the required investment).

The unit target selling price using the absorption costing approach is closest to: (Round your answer to 2 decimal places.)

a. $130.33

b. $117.51

c. $92.13

d. $87.53

25.

The management of Matsuura Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product:

Explanation / Answer

Cost of new product:-

Return on investment per unit = 27200 / 2800 = 9.71

The unit target selling price using the absorption costing approach = 107.80 + 9.71 = $ 117.51

Conclusion:- The unit target selling price using the absorption costing approach = $ 117.51

   The Option b is the right answer.

Per unit Material 48.80 Labour 15.80 Variable manufacturing overhead 7.80 Fixed annual manufacturing overhead = (69440 / 2800) 24.80 Variable selling and administrative expenses 3.80 Fixed annual selling and administrative expenses= (19040 / 2800) 6.80 Total cost per unit 107.8

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