Asked by elena gonzalez on Jun 27, 2024
Verified
The absorption costing approach to cost-plus pricing will result in attaining the company's required rate of return only if forecasted unit sales are realized.
Cost-plus Pricing
Pricing strategy where a fixed percentage is added to the total cost of making a product to determine its selling price.
Required Rate of Return
The minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular security or project.
- Appreciate the considerations involved in cost-plus pricing, including the absorption costing approach and its dependence on forecasted unit sales.
Verified Answer
DC
Dagoberto CantuJul 02, 2024
Final Answer :
True
Explanation :
Absorption costing includes all manufacturing costs in the product's cost and uses a markup to set the price. If forecasted unit sales are not achieved, the company may not generate enough revenue to cover all costs, resulting in lower profits or losses.
Learning Objectives
- Appreciate the considerations involved in cost-plus pricing, including the absorption costing approach and its dependence on forecasted unit sales.
Related questions
The Markup Over Cost Under the Absorption Costing Approach Would ...
The Management of Musselman Corporation Would Like to Set the ...
Nance Corporation Is About to Introduce a New Product ...
Diedrich Corporation Makes a Product with the Following Costs ...
What Is the Unit Product Cost for the Month Under ...