Asked by Phyllisa Starks on Jun 14, 2024
Verified
The markup over cost under the absorption costing approach would decrease if the required rate of return increases, holding everything else constant.
Absorption Costing
An accounting methodology that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.
Required Rate of Return
The minimum expected return on an investment necessary for it to be considered a worthwhile endeavor.
- Acknowledge the components associated with cost-plus pricing, including the absorption costing technique and its requirement for anticipated unit sales forecasts.
Verified Answer
LM
LeeAnn MarunaJun 20, 2024
Final Answer :
False
Explanation :
Under the absorption costing approach, the markup over cost is determined by the desired rate of return on investment or on sales, not directly by the cost. Increasing the required rate of return would typically lead to an increase in the markup to achieve the higher return, not a decrease.
Learning Objectives
- Acknowledge the components associated with cost-plus pricing, including the absorption costing technique and its requirement for anticipated unit sales forecasts.
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