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E-books Company is planning the introduction of a new product. The following information relating to the product has been assembled: Variable Costs (per unit): Materials,
E-books Company is planning the introduction of a new product. The following information relating to the product has been assembled:
Variable Costs (per unit): |
|
Materials, Labour, and Overhead | $15 |
Selling and Administrative | $3 |
Fixed Costs per Year: |
|
Manufacturing Overhead | $375,000 |
Selling and Administrative | $300,000 |
Investment Required | $750,000 |
Required Rate of Return | 20% |
Total Units to Be Produced and Sold Each Year | 75,000 |
The company uses the absorption costing approach to pricing.
Required:
- Determine the product cost.
- What would be the markup percentage needed on the new product?
- Compute the target selling price for one unit of the new product using the absorption costing approach.
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