Kircher, Inc., manufactures a product with the following costs: The company uses
ID: 2573307 • Letter: K
Question
Kircher, Inc., manufactures a product with the following costs:
The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 84,000 units per year.
The company has invested $328,000 in this product and expects a return on investment of 25%.
The selling price based on the absorption costing approach would be closest to: (Do not round the intermediate calculations.)
Noreen rechecks 2017-04-04
a. $91.96
b. $92.37
c. $73.35
d. $113.73
Per Unit Per Year Direct materials $ 27.90 Direct labor $ 15.40 Variable manufacturing overhead $ 3.60 Fixed manufacturing overhead $ 1,730,400 Variable selling and administrative expenses $ 3.50 Fixed selling and administrative expenses $ 1,713,600Explanation / Answer
Unit product cost = 27.9+15.4+3.6+(1730400/84000)= 67.5 Return required = 328000*25%= 82000 Selling price =((84000*67.5)+82000+1713600+(84000*3.5))/84000= 92.37 Option B is correct
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