Johnson Marine Has the Following Costs and Expected Sales for the Coming

question 84

Multiple Choice

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. $\begin{array}{lr}&\text { Total Costs }\\\text { Variable Manufacturing } & \$ 2,350,000 \\\text { Variable Selling and Administrative } & 750,000 \\\text { Plant-level Fixed Overhead } & 1,200,000 \\\text { Fixed Selling and Administrative } & 600,000 \\\text { Batch-level Fixed Overhead } & 200,000 \\\text { Total Investment in Product Line } & 10,000,000 \\\text { Expected Sales (units) } & 20,000\end{array}$ If Johnson determines price using a desired gross margin percentage of 50%, the price is:

• A) $262.50
• B) $306.00
• C) $375.00
• D) $364.29
• E) $330.00

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Definitions:

Equivalent Units

A concept used in cost accounting to convert partially completed goods into the equivalent of full units of output, facilitating consistency in financial reporting and analysis.

Fabricating Department

A division within a manufacturing company dedicated to the construction and assembly of the parts required to produce a finished product.

FIFO Method

An inventory valuation method that assumes that the first items placed in inventory are the first sold, standing for First-In, First-Out.

Equivalent Units

A concept in cost accounting used to convert partially completed goods into an equivalent number of fully completed units for inventory valuation.