Ocean Grove Vending Company has invested $980,000 in a plant to make vending machines. The target operating income desired from the plant is $196,000 annually. The company plans annual sales of 1600 vending machines at a selling price of $1100 each.
What is the cost base of each vending machine for Ocean Grove Vending Company?
A) $1100
B) $1422
C) $978
D) $613

Question

Quizplus · Accepted Answer

Sales revenue = 1600 units × $1100 = $1,760,000.
Cost base = [($1,760,000 - 196,000) / 1600] = $978.

Ocean Grove Vending Company Has Invested $980,000 in a Plant