Magner, Inc., uses the absorption costing approach to cost-plus pricing describe

Question

Magner, Inc., uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Based on budgeted sales of 35,000 units next year, the unit product cost of a particular product is $61.20. The company's selling and administrative expenses for this product are budgeted to be $810,400 in total for the year. The company has invested $410,000 in this product and expects a return on investment of 8%.
The selling price for this product based on the absorption costing approach would be closest to: (Do not round intermediate calculations.)

Explanation / Answer

Total cost = 61.2+(810400/35000)= 84.35 Required margin per unit = (410000*8%)/35000= 0.94 The target selling price for this product = 84.35+0.94= 85.29

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