Absorption Cost Approach: It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product. 1. Compute the unit product cost for the remodeled product. 2. Compute the markup percentage on absorption cost for the remodeled product. 3. What selling price would the company established for its remodeled product using markup percentage on absorption cost? 4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume? 5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

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Answer 1

Question

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

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Answer 2

Question

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

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Answer 3

Question

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

Expert Solution & Answer

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Answer 4

Question

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

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Answer 5

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

Answer 6

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

Answer 7

Chapter 13.A, Problem 10P

To determine

Absorption Cost Approach:

It is cost based method of determining the price under which the price of a product is based on the cost of incurred on the product. In other words, all the costs are absorbed under absorption cost approach in fixing the price of the product.

1. Compute the unit product cost for the remodeled product.

2. Compute the markup percentage on absorption cost for the remodeled product.

3. What selling price would the company established for its remodeled product using markup percentage on absorption cost?

4. If the company sold only 10,000 units (instead of its planned sales volume of 12,000 units) at the selling price that you derived in requirement 3. What ROI did the company actually earn at this lower sales volume?

5. Assume that the company wants to raise the price of its newly remodeled product with the intention of achieving the product’s desired ROI at the lower sales volume of 10,000 units. Using absorption cost-plus pricing, what would be the revised selling price at this lower sales volume? How might customers react to this new price?

Answer 8

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Answer 11

Ch. 13.A - EXERCISE 12A-1 Absorption Costing Approach to...Ch. 13.A - EXERCISE 12A-2 Customer Latitude and Pricing...Ch. 13.A - Prob. 3E Ch. 13.A - Prob. 4E Ch. 13.A - Prob. 5E Ch. 13.A - EXERCISE 12A-6 Value-Based Pricing; Absorption...Ch. 13.A - Prob. 7E Ch. 13.A - Prob. 8P Ch. 13.A - Prob. 9P Ch. 13.A - Prob. 10P

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