Marvel Company Estimates That the Following Costs and Activity Would

question 38

Multiple Choice

Marvel Company estimates that the following costs and activity would be associated with the manufacture and sale of one unit of product Y: $\begin{array}{ll}\text {Number of units sold annually }&20,000 \\\text { Required investment}&\$400,000 \\\text { Unit product cost.}&\$25 \\\text {Selling and administrative expenses. }& \$130,000\\\end{array}$
If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 15% rate of return on investment (ROI) , the required markup on absorption cost for product Y would be:

• A)12%
• B)15%
• C)26%
• D)38%

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Definitions:

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