Answer the following questions using the information below:
Judith Vending Company has invested $800,000 in a plant to make vending machines. The target operating income desired from the plant is $120,000 annually. The company plans annual sales of 1,200 vending machines at a selling price of $1,000 each.
-What is the markup percentage as a percentage of cost for Judith Vending Company?
A) 10.00%
B) 11.11%
C) 12.68%
D) 13.62%

Question

Quizplus · Accepted Answer

To calculate the markup percentage as a percentage of cost, we need to use the following formula:
Markup percentage as a percentage of cost = (Selling Price - Unit Cost) / Unit Cost x 100%
We know that the selling price is $1,000 per unit and the company plans to sell 1,200 units annually, so the total sales revenue will be:

Total sales revenue = Selling price x Number of units
Total sales revenue = $1,000 x 1,200
Total sales revenue = $1,200,000

To find the unit cost, we need to use the formula:

Unit cost = Total cost / Number of units
Unit cost = $800,000 / 1,200
Unit cost = $666.67

Now we can calculate the markup percentage as a percentage of cost:

Markup percentage as a percentage of cost = ($1,000 - $666.67) / $666.67 x 100%
Markup percentage as a percentage of cost = $333.33 / $666.67 x 100%
Markup percentage as a percentage of cost = 0.50 x 100%
Markup percentage as a percentage of cost = 50%

Therefore, the markup percentage as a percentage of cost for Judith Vending Company is 50%. The best choice(s) would be B, as it provides the correct answer.

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