Mahan, Inc

question 22

Multiple Choice

Mahan, 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 60,000 units next year, the unit product cost of a particular product is $56.20. The company's selling and administrative expenses for this product are budgeted to be $1,302,000 in total for the year. The company has invested $320,000 in this product and expects a return on investment of 8%.
The selling price for this product based on the absorption costing approach would be closest to:

• A) $108.57
• B) $77.90
• C) $78.33
• D) $60.70

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Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company’s financial condition at a specific time, including assets, liabilities, and shareholders' equity.

Depreciation Methods

Various techniques used to systematically allocate the cost of a tangible asset over its useful life, including straight-line, declining balance, and units of production methods.

Goodwill

An intangible asset representing the excess value paid for a company over its book value, reflecting factors like brand reputation or customer relations.

Classified Balance Sheet

A balance sheet that organizes a company's assets, liabilities, and equity into subcategories for more detailed and understandable financial analysis.