Nance Corporation is about to introduce a new product. The following costs would be incurred if 40,000 units are produced and sold each year: Per UnitTotalVariable production costs$10 400,000 Fixed production costs$5 200,000 Variable selling and administrative costs$2 80,000 Fixed selling and administrative costs$3 $120,000 ?Nance Corporation uses the absorption costing approach to cost-plus pricing as described in the text.?Assume that the company has not yet determined a markup to use on the new product. The new product would require an investment of $1,200,000. The company requires a 25% rate of return on investment in all new products. The markup under the absorption costing approach would be closest to:
A. 63.3%
B. 83.3%
C. 70.0%
D. 50.0%
Answer: B
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