Raymond Company estimates that an investment of $800,000 would be necessary to produce and sell 40,000 units of Product S each year. Costs associated with the new product would be: 
The company requires a 20% return on the investment in all products. The company used the absorption costing approach to cost-plus pricing as described in the text.
-The markup percentage needed on Product S in order to achieve the company's required return on investment would be:
Definitions:
Shortage
A scenario where the market demand for a service or product surpasses its available supply.
Surplus
An amount of something left over when requirements have been met; an excess of production or supply.
Price Ceiling
A maximum legal price that can be charged for a good or service, aimed at preventing prices from becoming too high.
Equilibrium Price
The market price at which the quantity of a good demanded equals the quantity supplied, leading to no excess supply or shortage.
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