Diedrich Corporation Makes a Product with the Following Costs

question 96

Multiple Choice

Diedrich Corporation makes 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 67,000 units per year.
The company has invested $420,000 in this product and expects a return on investment of 12%.
Direct labor is a variable cost in this company.
The selling price based on the absorption costing approach is closest to:

• A) $83.80
• B) $56.32
• C) $84.56
• D) $126.53

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Definitions:

Par Preferred Stock

A type of preferred stock that has a specified face value (par value) which determines the dividend calculation and has priority over common stock in dividend payments and upon liquidation.

Par Common Stock

The nominal or face value assigned to a share of common stock, as declared in the corporate charter, which has little bearing on the market value of the share.

Market Value

The present cost at which a service or asset is available for purchase or sale in the market.

Share-based Compensation

A form of remuneration where employees receive shares of the company's stock as part of their compensation package.