(Appendix 12A)Joeston Corporation Makes a Product with the Following Costs

question 112

Multiple Choice

(Appendix 12A) Joeston Corporation makes a product with the following costs: $\begin{array}{lccc}& \underline { \text { Per Unit } } & \underline { \text { per year} } \\\text { Direct materials } & \$ 14.70 & \\\text { Direct labour } & 14.10& \\\text { Variable manufacturing overhead } & 3.70 & \\\text { Fixed manufacturing overhead. } & & \$ 305,200 \\\text { Variable SG\&A expenses }&3.00\\\text { Fixed SG\&A expenses }&&163,800\end{array}$
The company uses the absorption costing approach to cost-plus pricing.The pricing calculations are based on budgeted production and sales of 14,000 units per year.The company has invested $540,000 in this product and expects a return on investment of 10%.The markup on absorption cost would be closest to which of the following?

• A) 10.0%.
• B) 27.1%.
• C) 34.2%.
• D) 124.2%.

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Definitions:

Estimated Cost

An approximation of the financial expenditure associated with a project, operation, or transaction, often used for budgeting purposes.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated for cost of goods sold determination.

Gross Profit

The difference between sales and the cost of goods sold, indicating the profitability of a company's core business activities.

Estimated Cost

An approximation of the financial expenditure associated with a project or production.