selling price based on the absorption costing approach
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The firm manufactures a product with the following costs: Direct materials→₱14.00; Direct labor→₱12.00; Variable manufacturing overhead→₱3.00; Fixed manufacturing overhead→₱1,500,000; Variable selling, general and administrative expenses→₱2.00; Fixed selling, general and administrative expenses→₱1,000,000. The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 80,000 units per year. The company has invested ₱500,000 in this product and expects a return on investment of 25%. Tax rate is 25%. The selling price based on the absorption costing approach would be closest to:
a. ₱50.46 b. ₱47.75 c. ₱83.08
d. ₱73.10 e. ₱64.33 f. ₱73.90
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