Raymond Company Estimates That an Investment Of $\$ 800,000$ Would Be Necessary to Produce and Sell 40,000 Units of Be

question 64

Multiple Choice

Raymond Company estimates that an investment of $\$ 800,000$ would be necessary to produce and sell 40,000 units of Product S each year. Costs associated with the new product would be:
$\begin{array}{|l|r|}\hline \text { Variable Costs (per unit) : } & \\\hline \text { Materials, Labour, and Manufacturing Overhead } & \$ 30 \\\hline \text { Selling and Administrative } & \$ 5 \\\hline \text { Fixed Cost per Year: } & \\\hline \text { Manufacturing Overhead } & \$ 300,000 \\\hline \text { Selling and Administrative } & \$ 240,000 \\\hline\end{array}$
The company requires a $20 \%$ return on the investment in all products. The company uses the absorption costing approach to pricing.
- What is the target selling price based on the absorption costing approach?

• A) $48.38.
• B) $51.38.
• C) $52.50.
• D) $56.25.

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