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20 May, 06:05

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

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  1. 20 May, 08:15
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    Target cost per machine = = $977.5

    Explanation:

    Target cost is derived by subtracting a desired profit margin from a competitive selling price. It represents the cost at which a company must produce in order to achieve a desired profit

    For Ocean Grove Vending Company, the target cost per vending machine can be determined as follows:

    Target cost per unit of machine

    = (Sales revenue - desired profit margin) / No of units sold=

    = (1600 * $11000) - $196,000) / 1,600

    =$977.5
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Home » Business » Ocean Grove Vending Company has invested $980,000 in a plant to make vending machines. The company plans annual sales of 1600 vending machines at a selling price of $1100 each. The target operating income desired from the plant is $196,000 annually.
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