Answer:
$81.96 per unit
Explanation:
For computing the selling price using the absorption costing approach we need to do the following calculations which are shown below:
Unit Product Cost = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead
= $26.50 + 15.50 + 3.70 + [$156,71,400 ÷ 97,000 Units]
= $26.50 + 15.50 + $3.70 + $16.20
= $61.90
Now
Selling and administrative expenses is
=$1,540,000 + [97,000 Units × $3.60]
= $1,540,000 + 349,200
= $1,889,200
And,
Markup on absorption cost
= [(Investment × Return on Investment) + Selling and administrative expenses] ÷ (Number of units × unit product cost)
= [($380,000 × 15%) + 1,889,200] / [97,000 × $61.90]
= $19,46,200 ÷ 60,04,300
= 0.3241 or 32.41%
So,
The selling price based on the absorption costing approach
= Unit product cost × (1 + Markup on absorption cost)
= $61.90 per unit × (1 + 0.3241)
= $81.96 per unit
