Eckert Corporation Uses the Absorption Costing Approach to Cost-Plus Pricing

question 52

Multiple Choice

Eckert Corporation uses the absorption costing approach to cost-plus pricing as described in the text to set prices for its products.Based on budgeted sales of 18, 000 units next year, the unit product cost of a particular product is $60.40.The company's selling and administrative expenses for this product are budgeted to be $370, 800 in total for the year.The company has invested $260, 000 in this product and expects a return on investment of 11%. The markup on absorption cost for this product would be closest to:

• A)45.1%
• B)36.7%
• C)11.0%
• D)34.1%

---

Definitions:

Long-Term Investments

Assets that a company intends to hold for more than one fiscal year, such as stocks, bonds, or real estate.

Intangible Assets

Non-physical assets with value to a business, such as trademarks, patents, goodwill, and copyrights.

Accruals

Accounting adjustments for revenues that have been earned or expenses that have been incurred but have not yet been recorded through a cash transaction.

Accrual Accounting

Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.