Willow Corporation Manufactures and Sells 20,000 Units of Product Z

question 194

Multiple Choice

Willow Corporation manufactures and sells 20,000 units of Product Z each year. In order to produce and sell this many units, it has been necessary for the company to make an investment of $500,000 in Product Z. The company requires a 20% rate of return on all investments in products. Selling and administrative expenses associated with Product Z total $200,000 per year. The unit product cost of Product Z is $20. The company uses the absorption costing approach to cost-plus pricing described in the text. The selling price for Product Z is:

• A) $25
• B) $30
• C) $35
• D) $40

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