Reference no: EM132573715
Question 1: Explain market pricing, absoption, and variable costing approah for prices! Which is the best?
Question 2: IAMI Corporation manufactures a product that has the following costs:
Per Unit ($) Per Year ($)
Direct materials 390
Direct labor 440
Variable manufacturing overhead 150
Fixed manufacturing overhead 400.000
Variable SG&A expenses 25
Fixed SG&A expenses 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 20000, units per year. The company has invested $30000000, in this product and expects a return on investment of 20%.
Required:
a. Compute the markup on absorption cost.
b. Compute the selling price of the product using the absorption costing approach.