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.

Question

Want to see more full solutions like this?

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Cullumber Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2025, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $16,800, direct labor $10,080, and manufacturing overhead $13,440. As of January 1, Job 49 had been completed at a cost of $75,600 and was part of finished goods inventory. There was a $12,600 balance in the Raw Materials Inventory account on January 1. During the month of January, Cullumber Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 and 50 were sold on account during the month for $102,480 and $132,720, respectively. The following additional events occurred during the month. 1. Purchased additional raw materials of $75,600 on account. 2. Incurred factory labor costs of $58,800. 3. Incurred manufacturing overhead costs as follows: depreciation expense on equipment $10,080; and various other…

Determine the amount to be paid in full settlement of each invoice, assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. Freight Paid Returns and Merchandise by Seller Freight Terms Allowances a. $9,400 $282 FOB Shipping Point, 1/10, net 30 $900 b. $8,600 $60 FOB Destination, 2/10, net 45 $1,900 a. $ b. $

Travis Company purchased merchandise on account from a supplier for $13,200, terms 2/10, net 30 on December 26. Travis Company paid for the merchandise on December 31, within the discount period. Required: Under a perpetual inventory system, record the journal entries required for the above transactions. Refer to the Chart of Accounts for exact wording of account titles.

Answer 2

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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.5E Ch. 6A - Prob. 6A.6E Ch. 6A - Prob. 6A.7E Ch. 6A - Prob. 6A.8P Ch. 6A - Prob. 6A.9P Ch. 6A - Prob. 6A.10P

Concept explainers

Videos

Answer to Problem 6A.1E

Explanation of Solution

Answer to Problem 6A.1E

Explanation of Solution

Want to see more full solutions like this?

Chapter 6A Solutions