Diehl Company Makes a Product with the Following Costs

question 23

Multiple Choice

Diehl Company makes a product with the following costs: 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 52,000 units per year.
The company has invested $420,000 in this product and expects a return on investment of 8%.
Direct labor is a variable cost in this company.
-The selling price based on the absorption costing approach is closest to:

• A) $78.50
• B) $54.10
• C) $79.15
• D) $108.62

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Definitions:

Uncertainty Forms

Refers to the different ways uncertainty manifests in a business environment, such as demand, supply, price, and lead time uncertainties.

Net Present Value

A financial metric that calculates the value of a series of future cash flows in today's dollars, factoring in both the time value of money and the risk of those cash flows.

Lease Cost

Lease cost refers to the expense incurred by leasing property or equipment, including monthly payments, maintenance, taxes, and other associated fees.

Rate of Return

The increase or decrease in value of an investment during a particular time frame, represented as a percent of the investment's initial cost.