Question
Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $200,000 in operating
Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $200,000 in operating assets to produce and sell 16,000 units. Its required return on investment (ROI) in its operating assets is 18%. The accounting department has provided cost estimates for the new product as shown below:
Per Unit | Total | |
---|---|---|
Direct materials | $ 7 | |
Direct labor | $ 5 | |
Variable manufacturing overhead | $ 2 | |
Fixed manufacturing overhead | $ 116,000 | |
Variable selling and administrative expenses | $ 1 | |
Fixed selling and administrative expenses | $ 50,000 |
Required:
1. What is the unit product cost for the new product? (Round intermediate calculations and final answer to 2 decimal places.)
2. What is the markup percentage on absorption cost for the new product? (Round intermediate calculations to 2 decimal places.)
3. What selling price would the company establish for its new product using a markup percentage on absorption cost? (Round intermediate calculations and final answer to 2 decimal places.)
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