Question
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:
a)Determine the product cost.
b)What would be the markup percentage needed on the new product?
c)Compute the target selling price for one unit of the new product using the absorption costing approach.
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