Eckhart Company Uses the Absorption Costing Approach to Cost-Plus Pricing

question 42

Multiple Choice

Eckhart Company uses the absorption costing approach to cost-plus pricing as 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 $13.60. The company's selling and administrative expenses for this product are budgeted to be $729,600 in total for the year. The company has invested $460,000 in this product and expects a return on investment of 11%.
-The markup on absorption cost for this product would be closest to:

• A) 83.8%
• B) 11.0%
• C) 94.8%
• D) 89.6%

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Definitions:

Deferred Revenue

Money received for goods or services which have not yet been delivered or rendered, considered a liability until the service or good is provided.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Deferred Revenue

Money received by a company for goods or services yet to be delivered or performed, recognized as a liability until the service or product is delivered.

Adjusting Entry

An accounting entry made to update the financial records before financial statements are prepared, ensuring they follow the accrual basis of accounting.