TB MC Qu. 12A-69 Nance Corporation is about to introduce ...

Nance Corporation is about to introduce a new product. The following costs would be incurred if 39,000 units are produced and sold each year:

	Per Unit			Total
Variable production costs	$	12		$	468,000
Fixed production costs	$	7		$	273,000
Variable selling and administrative costs	$	3		$	117,000
Fixed selling and administrative costs	$	5		$	195,000

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 $1,120,000. The company requires a 30% rate of return on investment in all new products. The markup under the absorption costing approach would be closest to:

Multiple Choice

83.3%

45.3%

87.4%

62.5%