Assuming Baker makes the change in the first quarter of 2018, how much is reported as net income for the first quarter of 2018?
A) $492,000.
B) $494,800.
C) $500,000.
D) $505,200.
E) $527,950.

Question

Quizplus · Accepted Answer

The total revenue for the first quarter of 2018 is $1,008,000 (given in the question).

The total cost of goods sold for the first quarter of 2018 is $345,600 (60% of $576,000, given in the question).

The total operating expenses for the first quarter of 2018 is $126,000.

Therefore, the net income for the first quarter of 2018 is:

$1,008,000 (Total revenue) 
- $345,600 (Cost of goods sold) 
- $126,000 (Operating expenses) 
= $536,400

But given that Baker is going to make a change in the first quarter of 2018 to reduce operating expenses by 4%, we need to calculate the new operating expenses:

$126,000 (Current operating expenses) 
- 4% of ($1,008,000 - $345,600) 
= $99,600

So, the new net income for the first quarter of 2018 is:

$1,008,000 (Total revenue) 
- $345,600 (Cost of goods sold) 
- $99,600 (New operating expenses) 
= $562,800

Therefore, the answer is D) $505,200.

Assuming Baker Makes the Change in the First Quarter of 2018