Reference no: EM132573715

Question 1: Explain market pricing, absoption, and variable costing approah for prices! Which is the best?

Question 2: IAMI Corporation manufactures a product that has the following costs:

Per Unit ($) Per Year ($)

Direct materials 390

Direct labor 440

Variable manufacturing overhead 150

Fixed manufacturing overhead 400.000

Variable SG&A expenses 25

Fixed SG&A expenses 600.000

The company uses the absorption costing approach to cost-plus pricing as described in the text. The pricing calculations are based on budgeted production and sales of 20000, units per year. The company has invested $30000000, in this product and expects a return on investment of 20%.

Required:

a. Compute the markup on absorption cost.

b. Compute the selling price of the product using the absorption costing approach.