E-Books Company Is Planning the Introduction of a New Product

question 73

Multiple Choice

E-books Company is planning the introduction of a new product. The following information relating to the product has been assembled:
$\begin{array}{|l|r|}\hline \text { Variable Costs (per unit) : } & \\\hline \text { Materials, Labour, and Overhead } & \$ 15 \\\hline \text { Selling and Administrative } & \$ 3 \\\hline \text { Fixed Costs per Year: } & \$ 375,000 \\\hline \text { Manufacturing Overhead } & \$ 300,000 \\\hline \text { Selling and Administrative } & \$ 750,000 \\\hline \text { Investment Required } & 20 \% \\\hline \text { Required Rate of Return } & 75,000 \\\hline \text { Total Units to Be Produced and Sold Each Year }\\\hline\end{array}$
The company uses the absorption costing approach to pricing.
- The markup percentage that would be needed on the new product is closest to which of the following?

• A) 12.5%.
• B) 24.0%.
• C) 51.0%.
• D) 45%.

---

Definitions:

Repaid

The action of paying back borrowed money to the lender.

Focal Date

A specific date of interest or importance within a plan, study, or project that serves as a central point of reference.

Economically Equivalent

A term used to describe two or more scenarios that have the same economic impact or value, despite being different in form or structure.

Payments

The transfer of money, goods, or services in exchange for a product or service.