Patterson and Clay Companies Both Use Cost-Plus Pricing Formulas and Arrived

question 68

Multiple Choice

Patterson and Clay Companies both use cost-plus pricing formulas and arrived at a selling price of $1,000 for the same product.Patterson uses absorption manufacturing cost as the basis for computing its dollar markup whereas Clay uses total cost.Which of the following choices correctly denotes the company that would have (1) the higher cost basis for deriving its dollar markup and (2) the higher markup percentage?

• A)Choice A
• B)Choice B
• C)Choice C
• D)Choice D
• E)Choice E

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Definitions:

IRR

Stands for Internal Rate of Return, a financial metric used to estimate the profitability of potential investments.

MIRR

The Modified Internal Rate of Return, which adjusts the IRR for the cost of capital and provides a better indication of a project's efficiency and profitability.

IRR

Internal Rate of Return; a metric in finance that helps in calculating the expected profitability of prospective investments.

Cash Flow

The total amount of money being transferred into and out of a business, affecting the company's liquidity.