Question

Aldean Company wants to use absorption cost-plus pricing to set the selling price on a new product. The company plans to invest $200,000 in operating assets to produce and sell 20,000 units. Its required return on investment (ROI) in its operating assets is 18%. The accounting department has provided cost estimates for the new product as shown below:

	Per Unit			Total
Direct materials	$	8.10
Direct labor	$	6.10
Variable manufacturing overhead	$	3.10
Fixed manufacturing overhead				$	156,000
Variable selling and administrative expenses	$	2.10
Fixed selling and administrative expenses				$	97,700

Required:

1. What is the unit product cost for the new product? (Round intermediate calculations and final answer to 2 decimal places.)

2. What is the markup percentage on absorption cost for the new product? (Round intermediate calculations to 2 decimal places.)

3. What selling price would the company establish for its new product using a markup percentage on absorption cost? (Round intermediate calculations and final answer to 2 decimal places.)

Answer 1