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 cost base of each vending machine for Judith Vending Company?
A) $1,000
B) $950
C) $900
D) $850

Question

Quizplus · Accepted Answer

The cost base per vending machine is calculated by subtracting the target operating income from total sales and then dividing by the number of units. Total sales are $1,200,000 (1,200 machines x $1,000). Subtracting the target income of $120,000 gives $1,080,000. Dividing by 1,200 machines results in a cost base of $900 per machine.

Answer the Following Questions Using the Information Below