Fandry Company Has Obtained the Following Data Concerning a New

question 67

Multiple Choice

Fandry Company has obtained the following data concerning a new product:
$$\begin{array} { l l } \text { Production Costs, Using traditional costing method } & \$ 3.00 \text { per unit } \\\text { Production Costs, Using activity-based costing method } & \$ 5.00 \text { per unit } \\\text { Nonproduction Costs, Using activity-based costing method } & \$ 2.50 \text { per unit }\end{array}$$
Fandry Company wants the price of the new product to cover all costs plus a 100% markup.The production process used for the low volume product is very complicated and it has a higher proportion of indirect costs than direct costs.
What price per unit should Fandry Company charge for the new product?

• A) $6.00
• B) $10.00
• C) $11.00
• D) $15.00

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Definitions:

Cash Dividend

A distribution of profits by a corporation to its shareholders in the form of cash.

Net Income

A company's total profit calculated by subtracting total expenses from total revenues.

Contingently Issuable Common Stock

Shares that may be issued in the future based on the occurrence of certain events.

Diluted Earnings Per Share

A measure of a company's profit divided by the number of shares outstanding, including all possible sources of conversion.