Mercer Company Is Planning the Introduction of a New Product

Multiple Choice

Mercer Company is planning the introduction of a new product. The following information relating to the product has been assembled:
$\begin{array}{|l|r|}\hline \text { Variable Costs (per unit) : } & \\\hline \text { Materails, Labour, and Overhead } & \$ 12 \\\hline \text { Selling and Administrative } & \$ 3 \\\hline \text { Fixed Costs per Year: } & \$ 360,000 \\\hline \text { Manufacturing Overhead } & \$ 300,000 \\\hline \text { Selling and Administrative } & \$ 650,000 \\\hline \text { Investment Required } & 25 \% \\\hline \text { Required Rate of Return } & 60,000 \\\hline \text { Total Units to Be Produced and Sold Each Year } & \\\hline\end{array}$
The company uses the absorption costing approach to pricing.
- The target selling price for one unit of the new product is closest to which of the following?

A) $22.00.
B) $26.50.
C) $28.71.
D) $32.67.