Nance Corporation Is About to Introduce a New Product

Multiple Choice

Nance Corporation is about to introduce a new product. The following costs would be incurred if 40,000 units are produced and sold each year: Nance Corporation uses the absorption costing approach to cost-plus pricing as described in the text.Assume that the company has not yet determined a markup to use on the new product. The new product would require an investment of $1,200,000. The company requires a 25% rate of return on investment in all new products. The markup under the absorption costing approach would be closest to:

A) 70.0%
B) 50.0%
C) 83.3%
D) 63.3%