The Management of Archut Corporation Would Like to Set the Selling

question 54

Essay

The management of Archut Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing.The company's accounting department has supplied the following estimates for the new product: Management plans to produce and sell 9, 000 units of the new product annually.The new product would require an investment of $3, 002, 400 and has a required return on investment of 10%.
Required:
a.Determine the unit product cost for the new product.
b.Determine the markup percentage on absorption cost for the new product.
c.Determine the selling price for the new product using the absorption costing approach.

---

Definitions:

Interest Rate

The rate a borrower pays to a lender for using assets, expressed in terms of the principal's percentage.

Borrow

The act of receiving something from someone with the intention of returning it or its equivalent after a period of time.

Monthly Payment

A regularly scheduled payment that is due every month, commonly associated with loans or leases.

Years

Units of time that represent a period of approximately 365 or 366 days, based on the Earth's orbit of the sun.