Diehl Company Makes a Product with the Following Costs

question 23

Multiple Choice

Diehl Company makes a product with the following costs: The company uses the absorption costing approach to cost-plus pricing described in the text. The pricing calculations are based on budgeted production and sales of 52,000 units per year.
The company has invested $420,000 in this product and expects a return on investment of 8%.
Direct labor is a variable cost in this company.
-The selling price based on the absorption costing approach is closest to:

• A) $78.50
• B) $54.10
• C) $79.15
• D) $108.62

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Definitions:

Molding Department

A specialized section of a manufacturing company focused on producing parts by shaping materials in molds.

Weighted-Average Method

A costing method that averages all costs and applies them to output, typically used in process costing.

Conversion Cost

The aggregate cost of direct labor and manufacturing overhead associated with converting raw materials into finished goods.

Direct Materials

Raw materials that are directly incorporated into a finished product.