Answer the following questions using the information below:
Crimpson Company has invested $2,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $299,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $400 each.
-What is the cost base of each juicer machine for Crimpson Company?
A) $357.29
B) $352.35
C) $338.64
D) $328.00

Question

Quizplus · Accepted Answer

To find the cost base of each juicer machine, we need to use the formula:

Cost base = (Total costs + Target operating income) / Units sold

Total costs = $2,000,000 (investment in plant)
Target operating income = $299,000
Units sold = 7,000

Cost base = ($2,000,000 + $299,000) / 7,000
Cost base = $2.28 + $42.71
Cost base = $44.99

Therefore, the cost base of each juicer machine for Crimpson Company is $44.99, which is closest to option A: $357.29.

Answer the Following Questions Using the Information Below