Magnussen, Inc., uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Based on budgeted sales of 45,000 units next year, the unit product cost of a particular product is $15.60. The company's selling, general, and administrative expenses for this product are budgeted to be $1,035,000 in total for the year. The company has invested $280,000 in this product and expects a return on investment of 11%. The selling price for this product based on the absorption costing approach described in the text would be closest to: A) $39.28 B) $17.32 C) $97.20 D) $38.60
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Magnussen, Inc., uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Based on budgeted sales of 45,000 units next year, the unit product cost of a particular product is $15.60. The company's selling, general, and administrative expenses for this product are budgeted to be $1,035,000 in total for the year. The company has invested $280,000 in this product and expects a
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