Mahboud,Inc

question 36

Multiple Choice

Mahboud,Inc. ,uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products.Based on budgeted sales of 64,000 units next year,the unit product cost of a particular product is $84.20.The company's selling and administrative expenses for this product are budgeted to be $1,292,800 in total for the year.The company has invested $560,000 in this product and expects a return on investment of 13%. The selling price for this product based on the absorption costing approach would be closest to:

• A)$95.15
• B)$130.86
• C)$104.40
• D)$105.54

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Definitions:

Fair Value

An estimate of the price at which an asset could be bought or sold in a current transaction between willing parties, not in a forced or liquidation sale.

Market Price

The current price at which an asset or service can be bought or sold in a competitive marketplace.

Stock Dividend

A dividend payment made to shareholders in the form of additional shares of stock rather than cash.

Stock Splits

Corporate actions that increase the number of shares outstanding, reducing the price per share but not changing the company's overall market capitalization.