Kircher,Inc The Company Uses the Absorption Costing Approach to Cost-Plus Pricing

question 110

Multiple Choice

Kircher,Inc.manufactures a product with the following costs:
$\begin{array}{|l|r|r|}\hline & \text { Per unit } & \text { Per year } \\\hline \text { Direct materials } & \$ 24.90 & \\\hline \text { Direct labour } & 13.90 \\\hline \text { Variable Manufacturing overhead } & 2.10 & \$ 1,182,600 \\\hline \text { Fixed manufacturing overhead } & & \\\hline \text { Variable SG\&A expenses } & 2.00 & 1,166,400 \\\hline \text { Fixed SG\&A expenses } & & \\\hline\end{array}$
The company uses the absorption costing approach to cost-plus pricing.The pricing calculations are based on budgeted production and sales of 81,000 units per year.The company has invested $220,000 in this product and expects a return on investment of 15%.The target selling price based on the absorption costing approach would be closest to which of the following?

• A) $53.29.
• B) $71.90.
• C) $72.31.
• D) $93.67.