Perwin Corporation Estimates That an Investment of $400,000 Would Be

question 35

Multiple Choice

Perwin Corporation estimates that an investment of $400,000 would be needed to produce and sell 30,000 units of Product B each year. At this level of activity, the unit product cost would be $25. Selling and administrative expenses would total $350,000 each year. The company uses the absorption costing approach to cost-plus pricing described in the text. If a 15% rate of return on investment is desired, then the required markup for Product B would be closest to:

• A)15%
• B)49%
• C)55%
• D)58%

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Definitions:

Inventory Error

An incorrect calculation or reporting of inventory quantity or value, which can affect financial statements.