Green Hornet Corporation Is Contemplating the Introduction of a New

Essay

Green Hornet Corporation is contemplating the introduction of a new product. The company has gathered the following information concerning the product: $\begin{array}{lr}\text {Number of units to be produced and sold each year. }&16,000 \\\text {Investment required by the company }&\$ 400,000 \\\text { Expected unit product cost. }&\$ 30 \\\text { Expected annual selling and administrative expenses }&\$ 100,000 \\\text { Desired rate of return on investment.}&20 \%\end{array}$ The company uses the absorption costing approach to cost-plus pricing as described in the text.
Required:
a. Compute the markup on absorption cost.
b. Compute the selling price.