Ecob Corporation Uses the Absorption Costing Approach to Cost-Plus Pricing

question 203

Multiple Choice

Ecob Corporation uses the absorption costing approach to cost-plus pricing as described in the text to set prices for its products. Based on budgeted sales of 19,000 units next year, the unit product cost of a particular product is $16.00. The company's selling and administrative expenses for this product are budgeted to be $250,800 in total for the year. The company has invested $440,000 in this product and expects a return on investment of 14%.The selling price based on the absorption costing approach for this product would be closest to:

• A) $59.21
• B) $29.20
• C) $32.44
• D) $18.24

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Definitions:

Indifference Curves

Graphical representations used in microeconomics to show combinations of two goods that provide equal satisfaction and utility to a consumer.

Nickels

Coins in the United States and Canada valued at five cents, made of a cupronickel alloy.

Dimes

A coin representing ten cents in the United States currency.

Marginal Rate

The marginal rate usually refers to the incremental increase or decrease in the assessment of a variable or cost in response to a change in some activity.