Absorption Costing Approach to Cost-Plus Pricing LO6â€”8 Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information: Required: Compute the markup percentage on absorption cost required to achieve the desired ROL. Compute the selling price per unit.

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Answer 1

Textbook Question

Chapter 6A, Problem 6A.1E

Absorption Costing Approach to Cost-Plus Pricing LO6â€”8

Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information:

Chapter 6A, Problem 6A.1E, Absorption Costing Approach to Cost-Plus Pricing LO6â€”8 Martin Company uses the absorption costing

Required:

Compute the markup percentage on absorption cost required to achieve the desired ROL.
Compute the selling price per unit.

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

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Textbook Question

Chapter 6A, Problem 6A.1E

Absorption Costing Approach to Cost-Plus Pricing LO6â€”8

Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information:

Chapter 6A, Problem 6A.1E, Absorption Costing Approach to Cost-Plus Pricing LO6â€”8 Martin Company uses the absorption costing

Required:

Compute the markup percentage on absorption cost required to achieve the desired ROL.
Compute the selling price per unit.

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

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Answer 3

Textbook Question

Chapter 6A, Problem 6A.1E

Absorption Costing Approach to Cost-Plus Pricing LO6â€”8

Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information:

Chapter 6A, Problem 6A.1E, Absorption Costing Approach to Cost-Plus Pricing LO6â€”8 Martin Company uses the absorption costing

Required:

Compute the markup percentage on absorption cost required to achieve the desired ROL.
Compute the selling price per unit.

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

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Answer 4

Textbook Question

Chapter 6A, Problem 6A.1E

Absorption Costing Approach to Cost-Plus Pricing LO6â€”8

Martin Company uses the absorption costing approach to cost-plus pricing. It is considering the introduction of a new product. To determine a selling price, the company has gathered the following information:

Chapter 6A, Problem 6A.1E, Absorption Costing Approach to Cost-Plus Pricing LO6â€”8 Martin Company uses the absorption costing

Required:

Compute the markup percentage on absorption cost required to achieve the desired ROL.
Compute the selling price per unit.

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

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Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

Answer 8

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-1:

The markup percentage.

Answer 13

Answer to Problem 6A.1E

The markup percentage is 25.71%.

Answer 14

Explanation of Solution

The markup percentage is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%

Answer 15

Expert Solution

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer to Problem 6A.1E

The selling price per unit is $35.

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

To determine

Concept Introduction:

Costing is a process of calculation of the cost of the product or service manufactured or provided by an organization. There are two methods of costing; absorption costing and variable costing.

As per nature, costs can be divided into three categories, i.e., variable costs, fixed costs, and mixed costs.

Requirement-2:

The selling price per unit.

Answer 20

Answer to Problem 6A.1E

The selling price per unit is $35.

Answer 21

Explanation of Solution

The selling price per unit is calculated as follows:

Number of units (A)	$ 14,000
Unit product cost (B)	$ 25
Total absorption product cost (C) = (A*B)	$ 350,000
Selling and admn expenses (D)	$ 50,000
Total Cost (E) = (C+D)	$ 400,000
Amount of investment (F)	$ 750,000
Desired return on investment (G)	12%
Desired markup (H) = (F*G)	$ 90,000
Markup % (I) = (H/C)	25.71%
Tota cost per unit (J) = (E/A)	$ 28.57
Markup per unit (K) = (H/A)	$ 6.43
Selling price (J+K)	$ 35.00

Answer 22

Ch. 6A - Absorption Costing Approach to Cost-Plus Pricing...Ch. 6A - Prob. 6A.2E Ch. 6A - Prob. 6A.3E Ch. 6A - Prob. 6A.4E Ch. 6A - Prob. 6A.7E Ch. 6A - Prob. 6A.8P Ch. 6A - Prob. 6A.9P Ch. 6A - Prob. 6A.10P Ch. 6A - Prob. 6A.11P Ch. 6A - Prob. 6A.12P

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