The Sloan Corporation Must Invest $120,000 to Produce and Market

Multiple Choice

The Sloan Corporation must invest $120,000 to produce and market 16,000 units of Product X each year. The company uses the absorption costing approach to cost-plus pricing described in the text to set prices for its products. Other cost information regarding Product X is as follows: $\begin{array}{lrr}&\text { Per Unit } & \text { total } \\\text {Direct materials }&\$ 7 & \\\text {Direct labor }&\$ 5 & \\\text {Variable manufacturing overhead }&\$ 24 \\\text { Fixed manufacturing overhead. }&&\$80,000\\\text { Variable selling and administrative expenses }&\$3\\\text { Fixed selling and administrative expenses }&&\$72,000\end{array}$ If Sloan Corporation requires a 15% return on investment, then the markup percentage on absorption cost for Product X (rounded to the nearest percent) would be:

A) 41%
B) 16%
C) 29%
D) 22%