Quamma Corporation Makes a Product That Has the Following Costs

question 78

Essay

Quamma Corporation makes a product that has the following costs:
The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 39,000 units per year.The company has invested $640,000 in this product and expects a return on investment of 9%.Required:a. Compute the markup on absorption cost. (Round your intermediate and final answer to 2 decimal places.)b. Compute the selling price of the product using the absorption costing approach. (Round your intermediate and final answer to 2 decimal places.)

Describe the criteria for determining capital improvements versus repair and maintenance expenses.

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Definitions:

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual amount they receive following trade.

Marginal Benefit

The boost in pleasure or utility a person gets from purchasing one more unit of a product or service.

Output

The aggregate output of products or services generated by an enterprise, sector, or economic system over a defined time frame.

Positive Externality

A benefit obtained without compensation by third parties from the production or consumption of sellers or buyers. Example: A beekeeper benefits when a neighboring farmer plants clover. Also known as an external benefit or a spillover benefit.