2. ABC Corporation manufactures a product that has the following costs:

Per unit ($) Per year ($)

Direct materials 600

Direct labor 680

Variable manufacturing overhead 260

Fixed manufacturing overhead -

Variable SG&A expenses 50

Fixed SG&A expenses 2.600.000

The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 50000, units per year. The company has invested $30000000, in this product and expects a return on investment of 15%.

Required:

a. Compute the markup on absorption cost.

b. Compute the selling price of the product using the absorption costing approach.