Diedrich Corporation Makes a Product with the Following Costs

question 125

Multiple Choice

Diedrich Corporation makes 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 67,000 units per year.The company has invested $420,000 in this product and expects a return on investment of 12%.Direct labor is a variable cost in this company.The markup on absorption cost is closest to:

• A) 12.0%
• B) 51.0%
• C) 49.6%
• D) 126.7%

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