Operating results for Division A of Alpha Company during 2019 are as follows:
If Division A would maintain the same quantity of product sold while raising selling prices by 10%, increasing direct labor costs by $20,000 and implementing a new marketing campaign at a cost of $10,000, what would be the effect on the Division's net income? (Ignore income taxes in your calculations.)
A) Net income would increase by $10,000.
B) Net income would increase by $20,000.
C) Net income would increase by $30,000.
D) Net income would decrease by $10,000.
E) None of the above.

Question

Operating results for Division A of Alpha Company during 2019 are as follows:
 If Division A would maintain the same quantity of product sold while raising selling prices by 10%, increasing direct labor costs by $20,000 and implementing a new marketing campaign at a cost of $10,000, what would be the effect on the Division's net income? (Ignore income taxes in your calculations.)
A) Net income would increase by $10,000. 
B) Net income would increase by $20,000. 
C) Net income would increase by $30,000. 
D) Net income would decrease by $10,000. 
E) None of the above.

Quizplus · Accepted Answer

The Answer is A

Operating Results for Division a of Alpha Company During 2019