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Nance Corporation is about to introduce a new product. The following costs would be incurred if 48,000 units are produced and sold each year: Per
Nance Corporation is about to introduce a new product. The following costs would be incurred if 48,000 units are produced and sold each year:
Per Unit | Total | |||||
Variable production costs | $ | 12 | $ | 576,000 | ||
Fixed production costs | $ | 8 | $ | 384,000 | ||
Variable selling and administrative costs | $ | 4 | $ | 192,000 | ||
Fixed selling and administrative costs | $ | 6 | $ | 288,000 | ||
Nance Corporation uses the absorption costing approach to cost-plus pricing as described in the text.
Assume that the company has not yet determined a markup to use on the new product. The new product would require an investment of $1,100,000. The company requires a 20% rate of return on investment in all new products. The markup under the absorption costing approach would be closest to:
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