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

question 31

Multiple Choice

Lagace Corporation uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Based on budgeted sales of 20,000 units next year, the unit product cost of a particular product is $81.60. The company's selling and administrative expenses for this product are budgeted to be $354,000 in total for the year. The company has invested $260,000 in this product and expects a return on investment of 13%.
The markup on absorption cost for this product would be closest to:

• A) 34.7%
• B) 23.8%
• C) 13.0%
• D) 21.7%

---

Definitions:

Pure Monopolist

A single seller in a market with no close substitutes for the product offered, enabling significant control over price.

Profit-Maximizing Price

The price point at which a company can sell its product or service to achieve the highest possible profit, considering the balance between price and sales volume.

Pure Monopolist

A single supplier in a market who has complete control over the price and supply of a unique product or service, without any close substitutes.

Profit-Maximizing

A strategic goal of firms to achieve the highest possible profit from their operations, often through efficient production and pricing strategies.