Use This Information for Magpie Corporation to Answer the Questions

question 58

Multiple Choice

Use this information for Magpie Corporation to answer the questions that follow.
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Magpie Corporation uses the total cost concept of product pricing. Below is the cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000.
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$$\begin{array} { l r } \text { Fixed factory overhead cost } & \$ 38,700 \\\text { Fixed selling and administrative costs } & 7,500 \\\text { Variable direct materials cost per unit } & 4.60 \\\text { Variable direct labor cost per unit } & 1.88 \\\text { Variable factory overhead cost per unit } & 1.13 \\\text { Variable selling and administrative cost per unit } & 4.50\end{array}$$
-Contractors who sell to government agencies would be most likely to use which of the following cost concepts in pricing their products?

• A) variable cost concept
• B) product cost concept
• C) total cost concept
• D) fixed cost concept

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Definitions:

Litigation Crisis

A situation where an organization faces significant legal challenges or lawsuits that could negatively impact its reputation and financial stability.

Threat

A potential danger or harm that may arise from external or internal factors and impact an individual, organization, or system.

Lawsuit

A legal case brought to a court by one party against another seeking a resolution to a dispute.

Puffery

The practice of making exaggerated, subjective claims about a product or service that cannot be objectively verified, often used in advertising.