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A product has a prime cost of $12 , variable overheads of $3 per unit and fixed overheads of $6 p.u
Which price policy gives the higest price? Options are: (A ) prime cost + 80%, (B)marginal cost + 60% , (C)TAC + 20% and (D)net merging of 14% on selling price .Answer is TAC + 20%
Working : 21 *(1.2)= $25.20 which was the highest selling price .
I perfectly understand all the workings of A & B because you lectured on this.
But What is TAC full meaning and how is calculated ?
Could it be total full cost which 21+ Net mergin ( 120/100) = $25.20?Thanks in Advance
TAC is total absorption cost (i.e. the full absorption cost) which is $21, giving a selling price of $25.20. I do give an example of this in my lecture.
(adding 20% to cost is a mark-up of 20%, not a margin. A margin is profit as a % of selling price.)(The exam will not use just the letters TAC – it will type it in full)
Thank you so much sir. Yes you did mentioned this , i was just ignorant of the Abbreviation.
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