Answer the following questions using the information below:
LM Juice Company has invested $2,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $360,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $400 each.
-What is the markup percentage as a percentage of cost for LM Juice Company?
A) 12.9%
B) 14.8%
C) 18.0%
D) 22.0%

Question

Quizplus · Accepted Answer

The markup percentage on cost is calculated by dividing the desired operating income by the total cost, then multiplying by 100 to get a percentage. First, calculate the total sales revenue: 7,000 machines * $400 each = $2,800,000. The desired operating income is $360,000, so the total cost is $2,800,000 (sales) - $360,000 (desired income) = $2,440,000. The markup percentage is ($360,000 / $2,440,000) * 100 = 14.75%, which rounds to 14.8%.

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