Question
Qudsi Company makes a product that has the following costs: Per Unit Per Year Direct materials $ 17.80 Direct labor $ 15.40 Variable manufacturing overhead
Qudsi Company makes a product that has the following costs: Per Unit Per Year Direct materials $ 17.80 Direct labor $ 15.40 Variable manufacturing overhead $ 2.70 Fixed manufacturing overhead $961,800 Variable selling and administrative expenses $ 4.40 Fixed selling and administrative expenses $567,000 The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 42,000 units per year. The company has invested $670,000 in this product and expects a return on investment of 12%. Required: a. Compute the markup on absorption cost. (Round your intermediate and final answer to 2 decimal places. Omit the "%" sign in your response.) Markup on absorption cost % b. Compute the selling price of the product using the absorption costing approach. (Round your intermediate and final answer to 2 decimal places. Omit the "$" sign in your response.) Target selling price $ c. Assume that every 13% increase in price leads to a 16% decrease in quantity sold. Assuming no change in cost structure and that direct labor is a variable cost, compute the profit-maximizing price. (Round your intermediate and final answer to 2 decimal places. Omit the "$" sign in your response.) Profit-maximizing price $ rev: 02_26_2015_QC_CS-9042
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