Merrick Candle Co. has estimated a production level of 460,000 candles this winter season. Merrick estimates they will incur $2.50 of variable product cost per candle and $230,000 of total fixed overhead cost. Variable selling and administrative costs are expected to be $0.90 per unit, and fixed selling and administrative costs are expected to reach $130,000 total. If Merrick plans to apply an 85% markup on the candles, what would the selling price per unit be using the absorption costing approach to cost-plus pricing? $5.55 $3.40 $6.29 $3.56
Expert Answer
Answer: $5.55
Variable product cost $ 2.50
Fixed overhead cost ($230000/460000) 0.50
Total unit
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