Ecob Corporation Uses the Absorption Costing Approach to Cost-Plus Pricing

question 46

Multiple Choice

Ecob Corporation uses the absorption costing approach to cost-plus pricing as described in the text to set prices for its products. Based on budgeted sales of 19,000 units next year, the unit product cost of a particular product is $16.00. The company's selling and administrative expenses for this product are budgeted to be $250,800 in total for the year. The company has invested $440,000 in this product and expects a return on investment of 14%.
-The selling price based on the absorption costing approach for this product would be closest to:

• A) $59.21
• B) $29.20
• C) $32.44
• D) $18.24

Understand the characteristics of perfectly competitive markets.

Identify the relationship between market demand and individual firm's profits in a perfectly competitive market.

Comprehend the concept of marginal revenue and how it relates to a firm's pricing and output decisions.

Understand the significance of the marginal cost in profit maximization for firms in perfectly competitive markets.

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Definitions:

Corporate Directors

Individuals elected by shareholders to oversee the management of a corporation and ensure that it is being run in accordance with their interests.

Corporation

A legal entity that is separate and distinct from its owners, capable of owning property, carrying on business, incurring liabilities, and suing or being sued.

Cash Tender Offer

A type of takeover in which the aggressor corporation offers to pay the target shareholders cash for their stock.

Corporate Takeovers

The process by which a company is acquired by another, often by purchasing a majority of its stock to gain control.