Question

Timothy Company has invested $1,000,000 in a plant to make vending machines. The target operating income desired from the plant is $150,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $1,000 each. What is the markup percentage as a percentage of cost for Timothy Company?

Answer 1

Answer:

11%

Explanation:

Calculation to determine the markup percentage as a percentage of cost for Timothy Company

First step is to calculate the Sales revenue

Sales revenue = 1,500 units × $1,000

Sales revenue = $1,500,000

Now let calculate the Markup percentage

Markup percentage = $150,000 / ($1,500,000 - $150,000)

Markup percentage = $150,000/1,350,000

Markup percentage= 11%

Therefore Markup percentage is 11%