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Softwind Manufacturing anticipates annual sales of 40,000 units and has the following information regarding one of its products: Annual unit sales 40,000 Fixed manufacturing costs $ 22 Variable manufacturing costs 44 Variable selling and administrative costs 16 Fixed selling and administrative costs 8 Desired profit per unit 18 If Softwind uses cost-plus pricing based on absorption manufacturing cost, what is the sales price Softwind will charge for this product

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Answer:

Selling price= $84

Explanation:

The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.

The variable costing method incorporates all variable production costs (direct material, direct labor, and variable overhead).

Unitary cost= varaible manufacturing cost + fixed manufacturing cost

Unitary cost= 44 + 22= $66

Selling price= 66 + 18

Selling price= $84

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