Mercer Company Estimates That an Investment of $800,000 Would Be

Essay

Mercer Company estimates that an investment of $800,000 would be necessary in order to produce and sell 40,000 units of Product A each year.Costs associated with the new product would be:
The company requires a 20% rate of return on the investment on all products.
Required:
a.Compute the markup that would be used under the absorption costing approach to cost-plus pricing as described in the text.
b.Compute the selling price under the absorption costing approach to cost-plus pricing as described in the text.