Use the information below to answer the following questions. Each question is to be considered separately.
The income statement of Berrima Barbed Wire Ltd is:
$ \begin{array}{lr} & \$ \ \text { Revenue } & 22,000 \ \text { Expense } & \underline{12,000} \ \text { Profit before income tax } & 10,000 \ \text { Income tax expense }(30 \%) & \underline{3,000} \ \text { Net profit } & \underline{7,000}\end{array} $
-If revenue increased by 30%,with no effect on expenses other than income tax,what would be the effect on net after tax profit?
A) It would increase by $6600.
B) It would decrease by $6600.
C) It would increase by $4620.
D) It would decrease by $4620.

Question

Quizplus · Accepted Answer

If revenue increased by 30%, then revenue would be $28,600. Expenses remain at $12,000, so the profit before income tax would be $16,600. Income tax expense at 30% would then be $4,980. Subtracting this tax expense from the profit before income tax gives a net profit of $11,620. This is an increase of $4,620 from the original net profit of $7,000. Therefore, the net after-tax profit would increase by $4,620 or 66%. The correct answer is C.

Use the Information Below to Answer the Following Questions -If Revenue Increased by 30%,with No Effect on Expenses Other