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

question 14

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 target selling price for one unit of the new product is closest to which of the following?

• A) $22.00.
• B) $26.50.
• C) $29.00.
• D) $32.67.

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Definitions:

Coffee

A beverage made from the roasted and ground seeds of the tropical evergreen coffee plant, consumed worldwide for its stimulating effects.

Total Revenue

The overall amount of income generated from the sale of goods or services, calculated by multiplying the selling price by the number of units sold.

Soybeans

A species of legume native to East Asia, widely grown for its edible bean which has numerous uses, including producing soy oil and soy protein.

Total Revenue

The total income generated from the sale of goods or services, calculated by multiplying the price by the quantity sold.