The Markup Percentage in the Absorption-Cost Approach Is Calculated by Dividing

question 5

Multiple Choice

The markup percentage in the absorption-cost approach is calculated by dividing the sum of the desired ROI per unit and

• A)fixed costs per unit by manufacturing cost per unit.
• B)fixed costs per unit by variable costs per unit.
• C)selling and administrative expenses per unit by manufacturing cost per unit.
• D)selling and administrative expenses per unit by variable costs per unit.

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Definitions:

Depreciation Expense

The allocated portion of the cost of a tangible fixed asset that is considered used up or consumed during its period of use in business operations.

Overhead Costs

Expenses related to the day-to-day operations of a business that are not directly tied to a specific product or service, such as rent, utilities, and office supplies.

Finished Goods Inventory

The stock of completed products that are ready to be sold but have not been sold yet.

Work In Process Inventory

Components, raw materials, and labor costs associated with partially completed goods during the manufacturing process.