Reference no: EM132620310

ABC Corporation manufactures a product that has the following costs:

                                            Per unit ($)                    Per year ($)

Direct materials                            600

Direct labor                                 680

Variable manufacturing overhead    260

Fixed manufacturing overhead             -

Variable SG&A expenses                     50

Fixed SG&A expenses                                                 2.600.000

The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 50000, units per year. The company has invested $30000000, in this product and expects a return on investment of 15%.

Required:

Question a. Compute the markup on absorption cost.

Question b. Compute the selling price of the product using the absorption costing approach.