Kirgan, Incorporated, Manufactures a Product with the Following Costs

question 41

Multiple Choice

Kirgan, Incorporated, manufactures a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 82,000 units per year.The company has invested $230,000 in this product and expects a return on investment of 16%.The selling price based on the absorption costing approach would be closest to: (Do not round intermediate calculations.)

• A) $64.90
• B) $72.85
• C) $81.60
• D) $51.27

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Definitions:

WACC

Stands for Weighted Average Cost of Capital, which calculates a firm's cost of capital, considering the proportion of each capital component, including debt and equity.

NPV

Net Present Value (NPV) is the calculation used to find today’s value of a future stream of payments, subtracting the initial investment.

Cash Flow

The complete financial movement into and out of a corporation, especially regarding its liquidity.

Equivalent Annual Annuity

A calculation used to compare the returns of investments with different payment schedules by converting them into an equivalent sum received at regular annual intervals.