Nance Corporation Is About to Introduce a New Product

question 347

Multiple Choice

Nance Corporation is about to introduce a new product. The following costs would be incurred if 44,000 units are produced and sold each year: Nance Corporation uses the absorption costing approach to cost-plus pricing as described in the text.Assume that the company has not yet determined a markup to use on the new product. The new product would require an investment of $1,480,000. The company requires a 30% rate of return on investment in all new products. The markup under the absorption costing approach would be closest to:

• A) 109.1%
• B) 50.5%
• C) 90.5%
• D) 63.2%

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