Lacy Corporation Uses the Absorption Costing Approach to Cost-Plus Pricing

Multiple Choice

Lacy Corporation uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Based on budgeted sales of 86,000 units next year, the unit product cost of a particular product is $81.60. The company's selling and administrative expenses for this product are budgeted to be $1,247,000 in total for the year. The company has invested $360,000 in this product and expects a return on investment of 12%. The markup on absorption cost for this product would be closest to:

A) 12.0%
B) 18.4%
C) 29.8%
D) 17.8%