Minden Corporation estimates that the following costs and ac

Minden Corporation estimates that the following costs and activity would be associated with the manufacture and sale of product A Number of units sold annually Required investment Unit product cost Selling and administrative expenses $102,900 22,000 $420,000 21 If the company uses the absorption costing approach to cost-plus pricing described in the text and desires a 14% rate of return on investment (ROI), the required markup on absorption cost for Product A would be closest to Multiple Choice 35% 22% 14% 13%

Solution

Required markup on absorption xoat=

[(Required ROI*Investment)+selling and administrative expenses]*100 ÷units product cost*units sale

=[(14%*$4,20,000)+$1,02,900]*100÷($21*22,000)

=($58,800+$1,02,900)*100÷$4,62,000

=($1,61,700*100)÷$4,62,000

=35%

Therefore answer is option (a)35%