Problem 12A-9 Absorption Costing Approach to Cost-Plus Pricing [LO12-8]

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.)