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

question 98

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 22,000 units next year, the unit product cost of a particular product is $60.80. The company's selling and administrative expenses for this product are budgeted to be $375,600 in total for the year. The company has invested $300,000 in this product and expects a return on investment of 9%.The markup on absorption cost for this product would be closest to: (Do not round intermediate calculations.)

• A) 26.1%
• B) 30.1%
• C) 9.0%
• D) 28.1%

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Definitions:

Discontinued Operations

Components of a business, such as a department or segment, that have been disposed of or are designated for disposal.

Significant Component

A major part or element of a larger system that plays a critical role in the system's overall function or performance.

Liquidity Ratios

Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

Short-Term Obligations

Financial liabilities that are due to be paid within one year.