Joeston Corporation Makes a Product with the Following Costs The Company Uses the Absorption Costing Approach to Cost-Plus Pricing

question 81

Multiple Choice

Joeston Corporation makes a product with the following costs: $\begin{array}{lrr}&\text { Per Unit } & \text { Per Year } \\\text {Direct materials }&\$ 14.70 & \\\text {Direct labor }&\$ 14.10 & \\\text {Variable manufacturing overhead }&\$ 3.70 \\\text { Fixed manufacturing overhead. }&&\$305,200\\\text { Variable selling and administrative expenses }&\$3.00\\\text { Fixed selling and administrative expenses }&&\$163,800\end{array}$ 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 14,000 units per year. The company has invested $540,000 in this product and expects a return on investment of 10%. The markup on absorption cost would be closest to:

• A)27.1%
• B)124.2%
• C)34.2%
• D)10.0%

---

Definitions:

Interest Rates

The percentages at which money is borrowed or lent, serving as a critical economic indicator and tool for monetary policy.

Treasury-Bond Futures

Treasury-bond futures are futures contracts based on the future value of U.S. Treasury bonds, used to hedge against or speculate on changes in interest rates.

S&P 500 Index Futures

Financial contracts that speculate on the future value of the S&P 500 index, allowing investors to bet on the direction of the stock market.

Buy

The action of acquiring ownership in a financial asset with the expectation that its value will increase over time.