Dieckman Company Makes a Product with the Following Costs

question 32

Multiple Choice

Dieckman Company makes a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 71,000 units per year.
The company has invested $360,000 in this product and expects a return on investment of 13%.
Direct labor is a variable cost in this company.

-The markup on absorption cost is closest to:

• A)25.7%
• B)13.0%
• C)24.2%
• D)72.4%

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Definitions:

Price

The total money amount demanded for the purchase of a service or good.

Product

An item offered for sale which can be a good, a service, or an idea.

Supply

The total quantity of a good or service that is available for purchase at various price levels in a given market.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a specific price level, at a given point in time.