(Appendix 12A)Trevor Company Is Contemplating the Introduction of a New

question 60

Essay

(Appendix 12A)Trevor Company is contemplating the introduction of a new product.The company has gathered the following information concerning the product:

$\begin{array}{ll}\text { Number of Units to Be Produced and Sold Each Year } & 12,000 \\\text { Investment Required by the Company } & \$ 200,000 \\\text { Projected Unit Product Cost } & \$ 25 \\\text { Projected Annual Selling, General, and } & \\\quad \text { Administrative Expenses } & \$ 90,000 \\\text { Desired Rate of Return on Investment } & 15 \%\end{array}$

The company uses the absorption costing approach to cost-plus pricing.

Required:

a) Compute the markup on absorption cost.
b) Compute the target selling price.
c) If the price computed in part b) above is charged, and costs turn out as projected, can the company be assured that no loss will be sustained on the new product? Explain.

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Definitions:

Mad Cow Disease

A fatal neurological disorder in cattle, caused by prions, which can be transmitted to humans through consumption of affected beef, leading to variant Creutzfeldt-Jakob disease.

Pragmatic Contributions

Practical additions or improvements made to a field or issue that are focused on practicality, effectiveness, and applicability in real-world scenarios.

Fear Appeals

A persuasion technique that involves raising alarm or concern about a potential danger to motivate specific behaviors.

Intentions

Plans or commitments to carry out an action in the future, often reflecting conscious decisions.