Werry Company Is About to Introduce a New Product

question 55

Multiple Choice

Werry Company is about to introduce a new product. It is expected that the following costs would be incurred when 25,000 units are produced and sold in a year: Werry Company uses the absorption costing approach to cost-plus pricing as described in the text.
-Assume that Werry Company has not yet determined a markup to use on the new product.The new product would require an investment of $800,000.The company requires a 20% rate of return on investment on all new products.The markup under the absorption costing approach would be closest to:

• A)62.0%
• B)80.0%
• C)35.0%
• D)24.6%

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Definitions:

Oral Notice

Notification or communication of information conveyed through spoken words rather than written form.

Commercial Illegality

The state of being contrary to the laws governing commerce and business practices.

Commercial Impracticability

A doctrine in contracts law where a party may be relieved from performing under a contract, due to unforeseen and impractical hardships, not within the contemplation of the parties at the time of the contract’s formation.

Perfect Tender Rule

A principle in commercial law that requires the delivery of goods to be exactly as specified in the contract without any deviation.