The Management of Matsuura Corporation Would Like to Set the Selling

question 32

Multiple Choice

The management of Matsuura Corporation would like to set the selling price on a new product using the absorption costing approach to cost-plus pricing. The company's accounting department has supplied the following estimates for the new product: Management plans to produce and sell 1,000 units of the new product annually. The new product would require an investment of $254,000 and has a required return on investment of 10%.
-The unit target selling price using the absorption costing approach is closest to:

• A) $122
• B) $132
• C) $99
• D) $97

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Definitions:

Conversion Costs

The combination of labor and overhead expenses incurred to transform raw materials into finished products.

Grinding Department

A production segment within a manufacturing facility where materials are ground, refined, or processed.

FIFO Method

A method of inventory valuation where the first items purchased or produced are assumed to be the first sold, known as First-In, First-Out.

Conversion Costs

The costs of converting raw materials into finished goods, including labor and overhead expenses.